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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 financial transaction) must 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 means ‘Know Your Customer.’ The set of regulations specifies when a company must first verify and validate a customer's identity 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 and the European Commission. Since 2019 and 2020, the laws have been extended that ALL blockchain-based companies that issue cryptocurrency accounts and/or do cryptocurrency transactions must do KYC on their customers.

Thus, we must do KYC on our customers who wish to withdraw from the platform. Generally speaking, we are supposed to do it when the wallet is CREATED. However, given that the user cannot do anything with the wallet until they are verified to begin with, doing it at the point of withdrawal is a fair compromise to make with our user base.

What is AML?

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

In 2019, the United 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 cryptocurrency account to a customer, they must verify its identity (see KYC above).

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.

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

  • CAP: Identifying who our customers will be, who will be accepted, and who will not - SoMee accomplishes this by ensuring that only people over the age of majority (18+ in the United States) are allowed to use the platform (our Terms of Service state this, which fulfills the CAP requirement).
  • CIP: Customer Identification program - used to identify customers before doing any financial transaction with them. SoMee does this with the KYC program (blue checkmark) before allowing you to do financial transactions (withdrawals) 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 is also allowed (we are working on automated tools, and an admin area that help identify these transaction anomalies).

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 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 wallets (one internally for our points) and the other externally for your ETH/ONG, we must do KYC 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 and 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, which can 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.

What's to come?

SoMee is an ever-changing platform and ecosystem of social media and blockchain - this means, ultimately, that things in the KYC space will change. We are considering a change to our process that lets us do KYC on three levels so it's not so intrusive on people:

  • Level 1: Email verification will give you the gray checkmark next to your name - your email address is verified.
  • Level 2: Live face verification will give you the blue checkmark next to your name - ergo, we know you have a valid email and are a human.
  • Level 3: Full KYC verification - this will give you the green checkmark next to your name - ergo, we know you have a valid email, are a human, and you have proven WHO you are to the KYC/AML system.

In all cases above, SoMee isn't aware of who you are unless you release that information to us. Without your permission, we cannot just go into our KYC/AML provider and look you up; in fact, your identity is secured with a random identity string. We'd have to get your permission to check your account in our admin dashboard and then use that identity string to look you up in the providers' system. And, we have stringent rules and requirements before any admin can even see that identity string. We also track when that identity string is accessed in the admin area.

For us, KYC is about making sure we are doing financial transactions with REAL and VERIFIED persons - and in the end, this helps prevent the ecosystem from being overrun with bots and bad actors.

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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