Digital AML Checks
Crypto is a rapidly emerging and exciting space. Some service providers in the crypto space offer verification of identity of investors by way of electronic or digital means. Such providers may partner with AML specialists located in different jurisdictions and are increasing the efficiency of the AML process by using sophisticated tools to digitally verify information. The result is that verification can be done in minutes rather than hours or several days or weeks utilizing a manual AML process.
As the industry veers towards the idea of transfers of tokens across ledgers and the replacement of share certificates with tokens to evidence ownership, here are a few things to consider when doing digital verification for your fund:
**What AML information is deemed mandatory under the AML regime of the fund’s jurisdiction
**Whether there are exceptions to the confirmation or verification of certain information under the rules of the AML regime of the fund’s jurisdiction
**Whether there are any gaps between the digital checks and the requirements of the AML regime of the fund’s jurisdiction
In answering the above questions, you may find that some gaps can be filled, either by the performance of enhanced due diligence procedures to meet the requirements of the AML regime of the fund’s jurisdiction or through confirmations in conjunction with the relevant AML partner used by the service provider offering verification of identity of investors by way of electronic or digital means.
Ultimately, we should work together to remove as many vulnerabilities as possible in this emerging space. From an AML perspective, this is important as trillions of dollars are moving to this space and platforms may be accessible globally. Your fund should be AML compliant from the first dollar received or expected receipt. In most cases, you may find that your fund must comply with the AML regime of its jurisdiction (including whether that jurisdiction permits the fund to rely on an AML delegate located in a jurisdiction with an AML regime that is deemed equivalent to the AML regime of the fund’s jurisdiction).
About the author
Alric Lindsay is a Cayman Islands corporate/funds lawyer and an independent fund director approved by the Cayman Islands Monetary Authority and licensed under The Directors’ Registration and Licensing Law. Alric also acts as voluntary liquidator to Cayman Islands entities. Alric can be contacted at firstname.lastname@example.org