SoMee and KYC/AML/CFT

December 17, 2020

Why Does SoMee require KYC?

SoMee isn’t just required to follow KYC, it is required to follow AML and CFT laws as well - this is because we are a United States operating company. Any company in the United States who does anything in the financial space (any type of financial transaction) is required to follow and adhere to the AML/KYC and CFT rules.

Let’s outline how that goes here, and what we are required to abide by:

What is KYC?

KYC simply means ‘Know Your Customer’ it is the set of regulations that exist that specify when a company must first verify and validate the identify of a customer, before doing financial transactions.

When blockchain first came out, and in the hay day of Bitcoin, KYC wasn’t even required - which prompted a lot of concern from regulators in the United States, as well as the European Commission. Since 2019 and 2020, the laws have been extended that ALL blockchain based companies that issue crypto currency accounts, and/or do crypto currency transactions must do KYC on their customers.

What is AML?

This is an old subset of laws and regulations that help prevent money from being used illegibly in criminal enterprises - ergo, laundering money for use where it shouldn’t be going.

In 2019, the Unites States Securities and Exchange Commission and Federal Trade Commission ratified new regulations that made all blockchain companies, projects, and backed companies subject to AML rules.

Basically, if the company issues a crypto currency account to a customer, they must verify the customers identity.

What is CFT?

Combating the Financing of Terrorism is a relatively new regulation that was ratified in the earlier 2011-2020 era, mainly targeting banks and exchanges. However, in late 2019, and ratified in mid 2020, all blockchain companies were subject to these regulations as well.

Basically, we have to adhere to three main tenants for CFT:

  • CAP: Identifying who our customers will be, and who will be accepted, and who will not - SoMee accomplishes this by making sure that only people over the age of majority (18+ in the United States) are allowed to use the platform.
  • CIP: Customer Identification program - used to identify customers before doing any type of financial transaction with them. SoMee does this with the KYC program (blue checkmark) before allowing you to do financial transactions (wthdrawls) from your account.
  • Monitoring: Ensuring that the transactions are verified, users fully KYC’d, and no unverified/unauthorized transactions users are on the system - ensuring that no trending or spike in activity that could look like terrorist criminal activities are also allowed on the system.

Why don’t other companies in the Blockchain space do KYC?

Many are starting to do so, in fact, many DAPP and newer blockchain companies that are releasing in 2020, and 2021 are adding the KYC process into their systems before allowing the withdraw of any cryptocurrency from their systems. However, the newer CFT and KYC requirements also require us to do KYC before issuing a cryptocurrency account to a user. As SoMee provides you two actual accounts (one internally for our points) and the other externally for your ETH/ONG, we must do KYC in order to allow you full control over these wallets.

Some companies don’t want to do full KYC, so they skirt the regulations and laws by only doing smaller KYC processes - verifying that you are a real person by requiring you to do selfies, or some other form of confirmation. However, In the UEC as well in the United States, this is no longer allowed in the KYC process as the PRIMARY identifier - we must know something legally about the customer.

We do this with a company called Sum&Substance, who is able to verify your identity, verify you against AML lists, and CFT lists, and ensure that the address and selfie information, and ID information you provide is valid.

As the months go on, you will see more Blockchain based companies doing these types of actions.

You can see here, if you wish to read more about AML/KYC and CFT and how it affects blockchain based projects: Cryptocurrency Compliance: KYC, AML, CFT, and Pending Rules | BitIRA®

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