KYC and AML Requirements
Understanding identity verification and anti-money laundering obligations
What Are KYC and AML?
KYC (Know Your Customer) refers to the process of verifying a customer's identity. When an exchange asks for your ID and proof of address, that's KYC.
AML (Anti-Money Laundering) refers to laws and procedures designed to prevent criminals from disguising illegally obtained money as legitimate funds. AML includes KYC but extends to transaction monitoring, suspicious activity reporting, and more.
Think of it like opening a bank account
Why These Rules Exist
Critics argue these rules conflict with crypto's privacy-focused origins and disproportionately affect legitimate users. Supporters say they're necessary for mainstream adoption and protecting the ecosystem's reputation.
Regardless of your view, these requirements are the law in most jurisdictions, and non-compliant services face serious consequences.
What KYC Typically Requires
Standard KYC verification usually involves providing:
Basic tier: Name, email, date of birth. May allow limited functionality.
Intermediate tier: Government-issued photo ID (passport, driver's license). Enables most trading features.
Advanced tier: Proof of address (utility bill, bank statement), source of funds documentation. Required for higher limits or institutional features.
Verification levels typically determine withdrawal limits, available features, and fiat currency access.
AML Compliance in Practice
Exchanges and other regulated crypto businesses must implement AML programs including:
Transaction monitoring: Flagging unusual patterns like rapid large transfers, transactions with known risky addresses, or behavior inconsistent with stated purposes.
Suspicious Activity Reports (SARs): Reporting potentially illicit activity to authorities. You won't be notified if a SAR is filed about you.
Travel Rule compliance: Sharing sender/recipient information between service providers for transfers above certain thresholds.
How This Affects You
- Most reputable exchanges require KYC—plan for verification delays
- Higher verification levels unlock more features and higher limits
- Your transaction patterns may be monitored for suspicious activity
- Non-compliant platforms carry higher risks of shutdown or seizure
Privacy Considerations
- •KYC data can be leaked in exchange hacks—consider which platforms you trust
- •Your identity is linked to your transactions on compliant exchanges
- •Once KYC'd, your crypto activity may be visible to authorities
- •Some jurisdictions require more extensive data sharing than others
Key Takeaways
- KYC verifies your identity; AML prevents financial crime
- Most legitimate exchanges require at least basic KYC
- Verification levels determine limits and available features
- Your transactions may be monitored for suspicious patterns
- KYC creates a tradeoff between access and privacy