Types of Credentials
KYC, KYB, AML, Accredited Investor, and Jurisidiction credentials are supported by BlueID
Types of Credentials
1. KYC ("Know Your Customer")
Know Your Customer (KYC) requirements mandate that companies collect and verify the identities of their customers to prevent fraud, money laundering, and terrorism financing. For example, the U.S. Financial Crimes Enforcement Network requires that cryptocurrency exchanges implement KYC procedures as part of their AML programs. Similarly, the EU's 5AMLD requires virtual currency service providers to conduct due diligence on their customers. Safe Tokens can verify the identities of both the sender and receiver in a transaction for the purpose of checking KYC. This helps assess any potential risks of a transaction between the two parties. The goal of KYC is to prevent Safe Tokens from being used, intentionally or not, for money laundering and other illegal activities.
2. KYB ("Know Your Business")
Know Your Business (KYB) is the process of verifying that another financial institution is legitimate and safe to transact with. This usually involves verifying key details about the financial institution and identifying the Ultimate Beneficial Owners (UBOs), or the key people behind the business, to understand who benefits from the business’s financial transactions — along with continuous AML monitoring.
3. AML - Off-Chain ("Anti-Money Laundering")
The purpose of AML is to help detect and report suspicious activity including predicate offenses to money laundering and terrorist financing (i.e., stop criminals from disguising illegally obtained funds as legitimate income). Collectively, these processes are known as "Continuous Monitoring" as sanctions lists & other databases are continuously checked against user identities to ensure they are cleared for Safe Token transactions.
4. AML - On-Chain ("Anti-Money Laundering")
Anti-Money Laundering (AML) on-chain has the same goals as AML off-chain, except that the approach is more analytical as it uses blockchains to scan wallets & transactions for high-risk or illicit activity. These processes are also ongoing and known as "Continuous Monitoring" for Safe Token transactions.
5. Accredited Investor
The term Accredited Investor is defined in Rule 501 of Regulation D. Under the federal securities laws, securities must be registered with the SEC or find an exemption from the registration requirements. For some of the exemptions, such as Rule 506 of Regulation D, a company may sell its securities to what are known as accredited investors. Various DeFi markets today have already begun exploring markets that require Accredited Investor checks (i.e., real world assets).
Jurisdictional checks can be useful for protocols or parties that wish to check the jurisdiction of users. These checks leverage the existing KYC information of users which means they cannot be bypassed with a VPN.
7. KYT ("Know Your Transaction")
Know Your Transaction (KYT) offers continuous transaction monitoring to detect patterns of high risk activity and prevent transactions with addresses identified on OFAC’s sanction list. KYT serves as a more analytical approach than traditional KYC processes as these providers monitor transaction patterns and use risk scoring to identifying potential high-risk activities.
8. Credit Score (coming soon)
Credit Score data can help DeFi money markets extend more capital efficient forms of credit. Safe Tokens will be connected to the major credit bureaus (i.e., TransUnion) and provide information on borrowers to facilitate under-collateralized or even unsecured loans.