Compliance Program [AML, CTF, KYC]
Virtual assets, which are targets of financial crime and terrorism! What are the protective laws?
Hello, everyone at Mossland!
You may be aware that financial crimes such as fraud, including phishing, are on the rise, particularly targeting virtual assets.
To address these issues, financial authorities, virtual asset exchanges, and virtual asset operators have been adopting strict regulations, such as AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing), and diligently complying with them to prevent illegal fund inflows and block terrorist financing efforts.
Additionally, in the interest of customer safety, they are making every effort to verify the identities of customers through the KYC (Know Your Customer) process, thereby supporting secure financial activities.
Mossland, too, has recently conducted internal training for all employees regarding these regulations and procedures, striving to provide you with a safe environment to use our platform. Therefore, we would like to share some of this educational content with you.
Please take the time to familiarize yourselves with this information and be vigilant about risks and regulations, such as criminal activities, fraud, and travel rule(a system for tracking fund transfers.)
Mossland will always work together with you to maintain a secure financial environment and continue supporting you.
AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing)
AML and CTF refer to important laws and regulations aimed at preventing and addressing financial crime and terrorism financing.
- AML (Anti-Money Laundering)
- AML (Anti-Money Laundering) is a comprehensive term that encompasses laws, regulations, and procedures aimed at preventing money laundering.
- Money laundering is the process of making funds obtained through illegal activities appear legitimate.
- It is primarily used by criminals to erase evidence of illegal activities and conceal the source of the funds.
2. CTF(Counter-Terrorism Financing)
- CTF (Counter-Terrorism Financing) involves laws, regulations, and procedures designed to prevent and disrupt the financing of terrorism.
- It encompasses various measures taken by financial institutions, government agencies, and relevant organizations to block the flow of funds supporting terrorism.
3. The Relevance of AML and CTF
- The financing of terrorism can ultimately be seen as one form of money laundering, and these two concepts play a crucial role in the prevention of both crime and terrorism.
4. Key Components
- Customer Identification (KYC): Verify and record customer identities.
- Transaction Monitoring: Continuously monitor customer transactions in real-time to identify suspicious activities.
- Reporting Obligations: Financial institutions are required to report any identified suspicious transactions to relevant authorities.
- Record Keeping: Financial institutions maintain all documents and records related to AML procedures for a specified period.
- Internal Policies and Training: Provide AML training to employees and establish internal policies to enforce compliance.
- Information Sharing: Share information with domestic and international institutions to more effectively disrupt terrorist financing networks (relevant to CTF).
KYC (Know Your Customer)
KYC (Know Your Customer) is a process for verifying and validating customer identities, which is essential for compliance with laws such as AML and CTF.
- Identity Verification:
When a customer opens an account or uses services, identity documents (such as passports, ID cards, etc.) are collected. - Creating Transaction Profiles:
Information about the customer’s transaction behavior, the source of funds, occupation, etc., is collected to create transaction profiles. - Ongoing Monitoring:
Account activity and transaction history are continuously monitored to identify suspicious activities or unusual transactions. - High-Risk Customer Classification:
Customers are classified based on various risk factors, and for high-risk customers, additional verification procedures are conducted.
Singapore, South Korean laws, and FATF (Financial Action Task Force)
- Singaporean Laws: Singapore enforces several laws and regulations related to AML and CTF, requiring the reporting of suspicious transactions and imposing strict fines and penalties.
- KYC Issuance by the Monetary Authority of Singapore (MAS)
2. South Korean Laws: South Korea rigorously regulates AML and CTF through laws such as the “Act on Reporting and Using Specified Financial Transaction Information” and the “Act on the Prohibition of Financing for Acts of Terrorism.” The Financial Supervisory Service (FSS) and the Financial Services Commission (FSC) issue KYC guidelines.
3. FATF (Financial Action Task Force): FATF is an international organization dedicated to combating international money laundering and the financing of terrorism, working to prevent money laundering across borders. South Korea became a full member of FATF in 2009.
Case Study of Virtual Asset Service Providers (VASP)
Virtual Asset Service Providers are required to strictly adhere to AML and KYC regulations. Here is an overview of their compliance procedures.
- Identity Verification (KYC):
- This includes the submission and verification of identity documents.
- Identity confirmation may also involve processes like taking a selfie or conducting live face matching.
2. AML Screening:
- After completing KYC, VASPs regularly screen individual information against databases to identify any potential risks related to money laundering or terrorist financing.
3. Suspicious Transaction Detection:
- Various tools and methods, such as transaction monitoring, machine learning algorithms, and additional KYC procedures, are utilized to detect suspicious transactions.
4. Additional Measures:
- When suspicious transactions are identified, VASPs take further actions, such as suspending transactions, reporting to authorities, or freezing accounts, as necessary.
🔍Suspicious Transaction Detection Patterns:
- Smurfing: Dividing a large amount into multiple small transactions for transfer.
- Rounding: When transaction amounts are rounded to specific numbers (e.g., $100, $500, $1000, etc.).
- Account Hopping: Money being transferred through multiple accounts in succession.
- Rapid Movement of Funds: Funds being deposited quickly and then immediately transferred to another account.
- High-Value Transactions: Transactions significantly larger than typical patterns.
- Piggybacking: Frequent small-scale transactions used to conceal larger transactions.
- Use of Privacy Coins: The use of cryptocurrencies that offer high levels of anonymity.
- High-Risk Jurisdictions: Transactions with countries lacking robust AML/CTF regulations.
- Frequent Change of Ownership: Frequent changes in account ownership over a short period.
- Transactions at Odd Hours: Transactions occurring at unusual or non-standard hours.
- New Account Activity: High-value deposits or transactions shortly after account creation.
Preventing money laundering and terrorist financing plays a crucial role in ensuring the safety of the financial system and the trustworthiness of international financial transactions.
Mossland is committed to strict compliance with these regulations, continually updating internal training to uphold the integrity of the financial system. 🤘
