Hacking and stealing funds is one of the biggest problems in the crypto world today.
According to data from Chainalysis, approximately $1.9 Billion of investor funds were lost by July 2022. This is an increase of about 60% in just one year.
This increase in criminal acts has made the identity verification process through the KYC or Know Your Customer and AML or Anti Money Laundering processes even more important.
This is because these two processes are considered a way to prevent and even tackle cases of hacking and theft of funds that occur.
The Importance of KYC and AML for Arresting Criminals
KYC or Know Your Customer is a verification process requested by the platform regarding personal identity when someone wants to use the forum.
Personal data is generally personal data such as information about yourself, such as a home address, date of birth, full name, and parent’s names.
AML is a collection of regulations or policies implemented by a platform based on existing state regulations to prevent and follow up on money laundering activities.
These two processes are essential when dealing with criminal acts, especially those currently rife in crypto.
Through these two processes, criminals who commit fraud can be easily identified because they have filled in their personal data and have agreed to the policies that have been set.
So that the approval and the personal data that has been submitted can be a way to make criminals reluctant and can be a way to catch the criminal.
This statement was approved by Tung Li Lim, Asia Pacific Senior Policy Advisor for Elliptic, a blockchain analytics firm.
He stated that the KYC and AML processes could make it easier for authorities to cooperate with crypto platforms to catch criminals.
“With KYC and AML, it will be easy to track the movement of funds from crypto to fiat. This means that after the theft or hacking, the individual will convert the taken crypto to fiat and to do that the individual needs a centralized trading platform which generally requires KYC and AML processes.” he said
According to him, two things can be done with the KYC and AML processes, especially with cooperation between the authorities, blockchain analysis platforms such as Chainalysis, and crypto trading platforms.
First, crypto trading platforms and blockchain analysts can stop funds and alert the authorities to prevent theft or catch criminals.
Second, suppose the hacker has obtained the stolen funds. In that case, the crypto trading platform already has a criminal identity, and the identity data can be retrieved and used by the authorities to catch the criminal.
Tung Li Lim then added KYC and AML to ensure criminals would be hesitant to use a well-regulated crypto trading platform because of the KYC and AML process. In essence, these two processes will reduce criminal acts through hacking and theft of funds.
Deny Narrative Crypto Money Laundering
Many investors should agree with the KYC and AML process because it can reduce the theft of their funds.
But unfortunately, many do not believe in the process. The reason is the narrative that KYC and AML taint the privacy aspect of crypto.
Tung Li Lim responded to this statement by stating that, in fact, this process helps security in the crypto world and can drive its growth.
In addition, he stated that this process should not be rejected or avoided because investors who comply and do not violate the law will follow this process correctly.
In an interview at Coinfest Asia 2022, Tung Li Lim also responded to the narrative of how crypto has always been considered a money launderer.
He responded by denying that crypto and blockchain are money launderers because crypto and blockchain technology actually provides high transparency and actually makes it difficult for criminals to steal or launder money.
“The fact that blockchain is a transparent thing, and all (transaction data) can be seen by all parties is, in my opinion, an unreasonable reason for criminals to use blockchain,” Lim said
. He also added that with the collaboration between regulated crypto trading platforms and blockchain analysis companies, this transparency is a significant advantage in fighting crime.
Furthermore, he also provides data for the context of how small money laundering cases are compared to the entire crypto market and the entire economy. He stated,
“In 2009 the United Nations stated that 2.7% of the world’s Gross Domestic Product was lost to criminal activities. That figure is around 1.6 Trillion US Dollars. Recent research states that this figure has now (2022) has risen to 6 Trillion US Dollars. As a context, the crypto market cap is only around 1 Trillion US Dollars at current prices.”
So, for now, he is stating the opposite of the narrative that has been said by individuals who continue to reject crypto, namely blockchain and crypto are relatively clean places from criminal acts.
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