AML and KYC policy of Coinoverse Trading Ltd
1
Introduction
Our KYC and AML Policy outlines the procedures and measures that our crypto exchange, "the Exchange," will implement to verify the identity of our customers and to prevent money laundering and terrorist financing activities. The policy applies to all customers who engage in financial transactions with the Exchange.2
Customer Due Diligence (CDD)
Our company follows a risk-based approach to customer due diligence, which involves verifying the identity of our customers, assessing their risk level, and monitoring their transactions. We have implemented a tiered KYC system that includes three levels of verification, each with different requirements and withdrawal limits.Level 1Know Your Customer
Level 1 KYC is the basic level of verification that all customers must complete upon sign-up. This includes verifying the customer's name and conducting AML, sanctions, and PEPs screening. Level 1 KYC allows customers to make deposits and withdraw up to 0.5 BTC per day. Level 2Know Your Customer
Level 2 KYC is required for customers who wish to withdraw more than 0.5 BTC per day or use fiat currency. This level of verification requires customers to provide additional documentation, such as a government-issued ID and a selfie with a liveness check, which allows customers to withdraw up to 50 BTC per day. We use Sumsub as our KYC provider for Level 2 verification. Sumsub conducts advanced document checks and biometric liveness checks to ensure that the customer's identity is valid and that they are who they say they are. Level 3Know Your Customer
Level 3 KYC is the highest level of verification that we offer. This level of verification is required for customers who wish to make withdrawals of more than 50 BTC. In addition to the requirements of Level 2 KYC, Level 3 KYC also requires customers to provide proof of address documentation, such as a utility bill or bank statements.By using a tiered KYC system, we are able to effectively verify the identity of our customers, assess their level of risk, and monitor their transactions accordingly. This helps us to prevent financial crime and maintain compliance with AML regulations.In addition to our tiered KYC system, we also conduct ongoing monitoring of our customers' transactions. This includes monitoring for unusual or suspicious activity, such as large or frequent transactions, transactions with high-risk countries or individuals, and transactions with known or suspected criminal or terrorist organizations.If we detect any suspicious activity, we will conduct further investigation and may take additional steps, such as filing a suspicious activity report (SAR) with the relevant authorities and freezing the customer's account.Our AML policy also includes regular training for our employees to ensure that they are aware of the risks of money laundering and terrorist financing and understand their role in preventing financial crime. This includes paid courses on blockchain analysis and combating financial crime.3
Transaction Monitoring System
Our company is committed to preventing financial crime and ensuring compliance with all applicable laws and regulations, including those related to the Bank Secrecy Act (BSA), the USA PATRIOT Act, and other relevant regulations. To achieve this goal, we have implemented a comprehensive transaction monitoring program that includes both fiat and crypto monitoring.As part of our commitment to preventing financial crime, we have partnered with Sumsub, a leading provider of digital identity verification and AML compliance solutions. Through this partnership, we can monitor both fiat and cryptocurrency transactions in real-time and receive alerts when certain pre-defined triggers are met. We also have a contract with Chainalysis and use their proprietary software "Reactor" for better crypto monitoring.Sumsub's transaction monitoring solution uses advanced algorithms to analyze transaction data and identify patterns and anomalies that may indicate suspicious activity. This includes monitoring for:High-risk countries and jurisdictions
Unusual transaction amounts or frequencies
Transactions involving known or suspected terrorist organizations or individuals
Transactions involving politically exposed persons (PEPs)
Transactions that do not match the customer's known profile or history
Transactions involving individuals or entities on government watchlists or sanctions lists
When Sumsub's system identifies a potential issue, our AML team is immediately alerted and begins a review of the transaction. If the transaction is found to be suspicious, we will take appropriate action in accordance with our AML policy, which may include reporting the transaction to the relevant authorities and/or terminating the business relationship with the customer.In addition to fiat monitoring, our transaction monitoring program includes monitoring of cryptocurrency transactions. Our team has implemented specialized tools and processes to monitor for suspicious activity in cryptocurrency transactions. This includes monitoring for:Transactions involving unregistered or unverified cryptocurrency exchanges
Transactions involving anonymous or pseudonymous wallets
Transactions involving large amounts of cryptocurrency that may be indicative of money laundering or terrorist financing
Transactions involving cryptocurrency mixers or tumblers
Our team of AML professionals is trained in cryptocurrency monitoring and uses a combination of automated tools and manual reviews to identify and investigate potential suspicious activity.We believe that our partnership with Sumsub and Chainalysis, combined with our in-house expertise in cryptocurrency monitoring, is an important step in strengthening our AML program and enhancing our ability to identify and prevent financial crime. We will continue to monitor our transactions closely and work with our partners and regulators to ensure that we are meeting the highest standards of compliance and risk management.4
Transaction Rules and Thresholds
Our transaction monitoring program includes pre-defined rules and thresholds that are used to identify potentially suspicious activity. These rules and thresholds are regularly reviewed and updated to ensure that they are effective in detecting suspicious activity.5
Periodic Review Strategy
We recognize that effective Anti-Money Laundering (AML) controls are vital to prevent the use of our platform for illicit activities. As part of our AML program, we have implemented a robust periodic review strategy to ensure that our customers' risk profiles are up to date and that we have accurate and current information about them. Periodic reviews are an essential part of our AML controls and are performed regularly for all customers. The frequency of the review is based on the customer's risk level and is as follows:High-risk customers are reviewed annually.
Medium-risk customers are reviewed every 18 months.
Low-risk customers are reviewed every 24 months.
The purpose of the periodic review is to assess the customer's ongoing risk level and to determine if any changes have occurred that may affect their risk profile. During the review, we collect updated information about the customer, including their occupation, source of funds, and beneficial ownership information. Our periodic review process is designed to ensure that we have accurate and current information about our customers and to identify any potential red flags that may indicate money laundering or terrorist financing.Some examples of the transaction rules and thresholds we use include:Large Transactions: Any fiat transaction over $100,000 or any cryptocurrency transaction over 5 BTC is flagged for review by our AML team.
High-Risk Countries: Transactions involving countries identified as high risk and on the FATF list for money laundering or terrorist financing are flagged for review.
Unusual Transaction Patterns: Transactions that deviate from a customer's typical transaction patterns or that do not match their known profile are flagged for review.
Politically Exposed Persons (PEPs): Transactions involving PEPs, as identified by government watchlists, are flagged for review.
Sanctions Lists: Transactions involving individuals or entities on government sanctions lists are flagged for review.
Anonymous or Pseudonymous Transactions: Cryptocurrency transactions that involve anonymous or pseudonymous wallets are flagged for review.
Cryptocurrency Mixers or Tumblers: Transactions involving cryptocurrency mixers or tumblers are flagged for review.
Unregistered or Unverified Exchanges: Cryptocurrency transactions that involve unregistered or unverified exchanges are flagged for review.
Unusual Source of Funds: Transactions where the source of funds is unusual or unknown, such as cash deposits without a clear source.
When these triggers are met. our AM L team performs a thorough review of the transaction to determine whether further action is necessary, such as filing a Suspicious Activity Report (SAR) with the relevant authorities.6
Ongoing Monitoring
Following the periodic review, we continue to monitor the customer's activity for any unusual or suspicious behavior. This ongoing monitoring is crucial for early detection of potential risks and helps us maintain a proactive stance against financial crime.7
Name Screening
We take a risk-based approach to customer due diligence and implement strict procedures to prevent money laundering and terrorist financing. Name screening is a critical aspect of our AML program and is performed before establishing any relationship with the customer. We use reliable and comprehensive data sources to screen customer names to ensure they are not associated with any sanctions, adverse media, or politically exposed persons (PEPs). These data sources are updated regularly to ensure we have the latest information available.In addition, we conduct periodic reviews of our customer base to ensure that our AML procedures remain effective and to identify any changes in risk that may require additional due diligence. Our periodic reviews include re-screening customer names against relevant data sources to identify any new or updated information that may impact their risk profile. If, during the course of our periodic reviews, we identify any potential matches with sanctions, adverse media, or PEPs, we will conduct enhanced due diligence to verify the identity of the customer and assess the nature and purpose of their transactions. If we are unable to complete our due diligence procedures or determine that the customer poses an unacceptable level of risk, we may terminate the customer relationship in accordance with our AML policies and procedures and report their activity to relevant authorities.8
Risk-Based Approach
Our company uses a risk-based approach to assess the level of risk associated with each customer and transaction. This approach involves assessing various factors, such as the customer's geographic location, transaction history, and type of business, to determine the level of risk associated with each customer and transaction. Customers located in high-risk countries, as identified by sources including the FATF and the US Department of State, may be considered higher risk. The size and frequency of transactions, source of funds, and the type of business engaged in can also be used to assess risk. Customers identified as PEPs may be considered higher risk.Based on the results of the risk assessment, we assign a risk rating to each customer and transaction. This risk rating is used to determine the level of due diligence required for each customer and transaction, as well as the frequency of transaction monitoring. A high-risk customer requires more frequent transaction monitoring and enhanced due diligence, such as additional identity verification and source of funds documentation. Similarly, a high-risk transaction requires additional review and investigation by our AML team. By using a risk-based approach, we can allocate our resources more effectively and efficiently while maintaining a strong AML program and reducing the risk of financial crime.9
Enhanced Due Diligence (EDD)
The Exchange will conduct Enhanced Due Diligence (EDD) procedures for customers deemed to pose a higher risk of money laundering or terrorist financing, including but not limited to the following circumstances:The customer is a politically exposed person (PEP), or an immediate family member or known close associate of a PEP.
The customer is from or has connections to high-risk jurisdictions identified by reputable sources, including the Financial Action Task Force (FATF).
The customer's transaction or activity is complex, unusual, or has no apparent economic or legal purpose.
The customer has been identified as having a history of suspicious transactions or activities.
The customer has been identified as a high-risk entity, such as a money services business (MSB), virtual asset service provider (VASP), or other high-risk business.
The Exchange will take additional measures to verify the customer's identity, assess the source of funds and wealth, and understand the nature and purpose of the business relationship. This may include obtaining additional documentation or information, such as bank statements, financial statements, or third-party reports, to verify the customer's identity and assess the risk.10
Suspicious Activity Reporting
The Exchange is committed to identifying and reporting suspicious activity in accordance with applicable laws and regulations. Any employee who becomes aware of suspicious activity must report it to the compliance officer, who will be responsible for reviewing and escalating the report as necessary. The Exchange will maintain a system for reporting suspicious transactions or activities, including the designation of a compliance officer to receive reports of suspicious activity.The Exchange will establish and maintain a record of all reports of suspicious activity, as well as the results of any subsequent investigations. If the investigation determines that a transaction or activity is suspicious, the Exchange will file a suspicious activity report (SAR) with the appropriate regulatory authority in accordance with applicable laws and regulations. The Exchange's employees will receive training on recognizing and reporting suspicious activity, including completing a SAR.The Exchange will regularly review and update the policy to ensure it remains effective and in compliance with applicable laws and regulations. We will cooperate fully with regulatory authorities and law enforcement agencies in the investigation and prosecution of any illegal activity and will not engage in any transaction or activity known or suspected to be related to money laundering or terrorist financing.11
Record-Keeping
The Exchange is committed to maintaining accurate and complete records in accordance with applicable laws and regulations. We will establish and maintain a system for the retention of all records related to customer identification, due diligence, and transaction monitoring. These records will be kept for at least five years following the termination of the business relationship with the customer, including records related to SARs and their investigations. All records will be maintained in a secure and confidential manner, with access restricted to authorized personnel only. They will be kept in a manner that allows for their prompt retrieval by regulatory authorities and law enforcement agencies as needed. The Exchange will regularly review and update its record-keeping procedures to ensure they remain effective and in compliance with applicable laws and regulations. We will not alter or destroy any required records except as authorized by law or regulation.12
Training
The Exchange is dedicated to ensuring that all employees receive appropriate training on our KYC and AML Policy, as well as applicable laws and regulations related to anti-money laundering and counter-terrorist financing. New employees will receive initial training before commencing their duties, and all employees will receive regular refresher training. The training program will cover, at a minimum, the Exchange's KYC and AML Policy, the legal and regulatory framework for anti-money laundering and counter-terrorist financing, the risks associated with money laundering and terrorist financing, the procedures for reporting suspicious activity, and the consequences of non-compliance. The Exchange will maintain records of all training provided, including the content, date, and attendees. We will regularly review and update our training program to ensure it remains effective and in compliance with applicable laws and regulations.13
Compliance Officer
The Exchange will appoint a Compliance Officer responsible for overseeing the implementation and effectiveness of our KYC and AML Policy and ensuring compliance with applicable laws and regulations related to anti-money laundering and counter-terrorist financing. The Compliance Officer's responsibilities will include developing, implementing, and maintaining the KYC and AML Policy; providing guidance and training to employees; monitoring the Exchange's compliance; overseeing the SAR reporting process; serving as the primary contact for regulatory authorities and law enforcement; ensuring that records are accurately maintained and retained; and reporting regularly to senior management on the effectiveness of the Exchange's KYC and AML program. The Compliance Officer will have sufficient authority, resources, and independence to perform their responsibilities effectively and will report directly to senior management. The Exchange will ensure that all employees are aware of the role and responsibilities of the Compliance Officer and the importance of compliance with the KYC and AML Policy and applicable laws and regulations.14
Third-Party Providers
The Exchange may engage third-party providers to assist with customer identification, due diligence, transaction monitoring, or other activities related to anti-money laundering and counter-terrorist financing.a. Before engaging any third-party provider, the Exchange will conduct a risk assessment to evaluate the provider's ability to comply with applicable laws and regulations and to provide the necessary level of support and expertise to meet the Exchange's requirements.b. The Exchange will require all third-party providers to sign a written agreement that includes provisions related to compliance with applicable laws and regulations, confidentiality, data protection, and any other relevant requirements.c. The Exchange will monitor the performance of all third-party providers on an ongoing basis to ensure that they are complying with the terms of the agreement and that they are providing the necessary level of support and expertise to meet the Exchange's requirements.d. The Exchange will maintain appropriate oversight of all third-party providers and will take appropriate action if any provider is found to be non-compliant with applicable laws and regulations or the terms of the agreement.e. The Exchange will ensure that all employees are aware of the role and responsibilities of any third-party providers and that they understand the importance of compliance with the KYC and AML Policy and applicable laws and regulations, including the requirement to comply with any policies and procedures established by third-party providers.15
KYC and AML for Fiat Transactions
Customers who use fiat currency to transact on the Exchange will be subject to additional KYC and AML procedures, including:a. Verifying the source of funds used for the transaction.b. Conducting enhanced ongoing monitoring of the customer's transactions and activities.c. Requiring the customer to provide additional information, such as bank statements or proof of income.16
Geographical Restrictions
The Exchange operates globally but is subject to various laws and regulations in different jurisdictions. To ensure compliance with these requirements, the Exchange has implemented the following policies and procedures for different geographic regions: a. United States: The Exchange does not accept clients from the United States and will not engage in any transactions that violate U.S. sanctions or other regulatory restrictions. The Exchange will comply with all applicable U.S. laws and regulations related to anti-money laundering and counter-terrorist financing, including the Bank Secrecy Act and the USA PATRIOT Act.b. United Kingdom: The Exchange does not accept clients from the United Kingdom and will not engage in any transactions that violate UK sanctions or other regulatory restrictions. The Exchange will comply with all applicable UK laws and regulations related to anti-money laundering and counter-terrorist financing, including the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.c. European Union: The Exchange will comply with all EU applicable laws and regulations related to anti-money laundering and counter-terrorist financing, including the 5th and 6th Anti-Money Laundering Directives, and will not engage in any transactions that violate EU sanctions or other regulatory restrictions.d. Other Jurisdictions: The Exchange will comply with all applicable laws and regulations in the jurisdictions where it operates, including those related to anti-money laundering and counter-terrorist financing. The Exchange will conduct a risk assessment for each jurisdiction to identify any specific risks related to money laundering or terrorist financing and may implement additional policies and procedures for high-risk jurisdictions, such as enhanced due diligence or additional transaction monitoring.The Exchange reserves the right to modify this policy at any time, in accordance with applicable laws and regulations.Conclusion
The Exchange takes its KYC and AML obligations very seriously and is committed to maintaining a strong compliance program that complies with applicable laws and regulations. By implementing the policies and procedures outlined in this policy, the Exchange aims to prevent and detect any potential money laundering or terrorist financing activities on its platform and to protect the integrity of its services. However, it is important to note that no compliance program can be completely foolproof, and there is always a risk of illicit activities occurring on the platform. As such, the Exchange encourages its clients and partners to report any suspicious activities or transactions to its compliance team and to work with the Exchange to ensure the highest level of compliance. Clients and partners are advised to regularly review this policy and any updates to ensure continued compliance with AML requirements.