Use case
AML screening for
Crypto Businesses
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Why screening matters for crypto businesses
Innovative technologies, such as cryptocurrency, have revolutionized the way how people interact with each other when it comes to financial transactions. While crypto exchanges may provide significant benefits to consumers by streamlining financial interactions, they also create new money laundering and terrorist financing risks. The European Union (EU) included crypto-fiat exchanges and wallet providers in 2018 into the scope of its AML regulations (the so called AMLD5), meaning they must comply with the same rules as financial institutions1.
Why criminals target crypto
Some of the risk factors money launderers are attracted to in this sector include the simplicity of use, globally transferable virtual currencies, easy conversion ability, inexpensiveness due to low commissions as well as the speediness of transfer2. Crypto exchanges using free software packages are identified as particular popular for terrorist financiers, demonstrating their suitability as a scalable alternative to more traditional terrorist funding transfer methods3.
The FATF Travel Rule
Virtual Asset Service Providers (VASPs) and financial institutions involved in virtual asset transfers are required to abide by the Travel Rule under the updated FATF Recommendations. It entails gathering and sharing with VASPs or financial institutions the personal information of the sender and recipient of a crypto transaction.
For virtual asset transfers, the FATF's suggested threshold is $1,000/€1,000. As a result, VASPs can take advantage of less onerous requirements if a transaction amount is below the threshold. However, country-specific thresholds can be established4.
Travel Rule versus KYC
In accordance with the Travel Rule, VASPs must gather and verify specific client data, including checks against sanctions lists. This compliance process is partially covered by the KYC procedure. Information gathering outside the purview of KYC is necessary to fulfill Travel Rule obligations. It should be noted that KYC and the Travel Rule are separate requirements under AML regulations despite their overlaps5.
The challenge
The approach
By conducting proper AML compliance, crypto exchanges demonstrate their commitment to combating financial crime and protecting the financial system. Additionally, compliance with AML regulations helps crypto exchanges maintain the trust and confidence of their clients, regulators, and other stakeholders.
Crypto exchange companies are in need of vigorous AML processes. The Crypto Know Your Customer (KYC) process typically involves identity verification, risk assessments, and transaction monitoring. In order to ensure that there are no illegal activities, such as money laundering or financing terrorism, they must confirm the identity of each sender and beneficiary, which is why it is essential to perform AML and sanction screening.
Why dilisense
dilisense can help you run the risks-screening process in a coherent way by identifying PEPs and sanctioned / blacklisted entities. We can not only aid you in the extraction of necessary PEPs, but we can also modify your needs by adding any regulatory authority listings you want to keep track of. Modern technology is used by dilisense to automate PEP and sanction checks, reducing the chance of human error and boosting processing efficiency.
Join us today! We can support your sanction screening processes and make sure your crypto business is complying with the Travel Rule, which implies that VASPs and financial institutions ought to check clients against worldwide sanction lists!
04 — Recommended products
The right setup for crypto businesses
Every product screens against the same consolidated database — pick the integration that fits your team.
AML Screening API
Real-time REST API to screen against 10,000+ global sanctions, PEP and adverse media sources with sub-150ms response.
Ongoing Monitoring
Continuous re-screening of your customer base with instant alerts when sanctions or PEP status changes.
Adverse Media API
NLP-powered real-time adverse media screening — surface negative coverage tied to individuals and entities for due diligence.
Pay per use
A screening API at a fraction of the usual market price
Integrate the REST API and pay per call — no seat licenses, no minimum contract. Start on the free tier and scale into volume pricing as your check volumes grow.
per call, pay as you go
free calls every month
per call at volume
Frequently asked questions
Yes. Since 2018, the EU's AMLD5 has included crypto-fiat exchanges and wallet providers in the scope of its AML regulations, so crypto businesses must comply with the same rules as financial institutions. The updated FATF Recommendations additionally subject Virtual Asset Service Providers to the Travel Rule, which requires verifying client data and checking senders and beneficiaries against international sanction lists.
Crypto exchanges typically screen customers at onboarding through a REST AML screening API that returns JSON responses and offers fuzzy-search filters to reduce false positives. Teams without developers can screen large record sets through an Excel-based batch tool, and businesses that must keep customer names in-house can run unlimited checks against a downloadable on-premise database. Ongoing monitoring then rescreens existing customers and alerts on risk profile changes.
Under the FATF Travel Rule, crypto businesses must check clients against worldwide sanction lists. In practice, screening covers international and domestic sanction lists, politically exposed persons (PEPs), criminal and enforcement data, and adverse media. dilisense aggregates these public sources and updates them every 60 minutes, so newly sanctioned individuals and entities show up in a crypto exchange's checks within the hour.
Crypto businesses can start small: dilisense offers an unlimited free sanctions and PEP search with no registration, so ad-hoc checks cost nothing. Automated screening through the API is pay-per-use with no monthly fee and includes a free call allowance every month, with volume tiers lowering the per-call price as a crypto exchange scales. Batch screening via Excel needs no IT integration, keeping setup effort minimal.
References
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Some of our clients allow us to share their names in certain cases — ask us for references and we’ll connect you.
Related industries
- 1 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843
- 2 https://link.springer.com/article/10.1057/s41284-022-00356-z
- 3 https://www.bleepingcomputer.com/news/security/npm-packages-used-by-crypto-exchanges-compromised
- 4 https://www.fatf-gafi.org/content/dam/fatf/documents/recommendations/Updated-Guidance-VA-VASP.pdf
- 5 https://sumsub.com/blog/crypto-kyc-guide