A basic idea of cryptocurrencies is the individual freedom of each person to decide about his or her own finances. Third parties should not have the possibility to interfere with the transactions of others. This has made Bitcoin extremely successful and is ultimately the reason why other crypto are also considered innovative payment systems.
For brokers like LiteBit, a lot has changed since the beginning of 2020. The new anti-money laundering regulations, which are implemented at European level with AMLD5, have changed the market. Each member state implements the new directive through its own legislation, which has slightly different interpretations, but basically follows the same principles.
What does this mean for our customers and how do these new measures provide additional security on our exchange?
Money laundering is a phenomenon affecting society as a whole
Money is a sensitive topic for many people. In many cultures people tend to not talk about it too openly. Money laundering is even more sensitive because the countermeasures usually encroach on individual privacy. There is a whole catalogue of preventive measures to ensure that it does not come to that and that every suspicious case leads directly to an investigation.
But before we take a closer look at how this works, it is worthwhile to look at some background information on money laundering. Money laundering is often preceded by other offences. This can be tax evasion or corruption, but also the trade of illegal goods, the proceeds of which have to be booked somewhere, so that criminals can regain regular access to the funds and insert them "normally" into the economic cycle.
Therefore, money laundering is a crime that causes great damage within society. Because only when criminals get away with their money they can hardly be caught. On the contrary, their position becomes even stronger.
So, when you take part in measures against money laundering, you support the functionality of our society as a whole. It prevents criminals from further damaging our community beyond their actual crimes.
Know your customer
We cannot talk about a whole part of the technical measures that are taken in the background in order to check that everything is going as it should be. After all, we want to protect these measures in order to prevent anyone from undermining them.
However, the part that directly affects our customers is, of course, an issue on which we are happy to share our ideas. The term "KYC" is very common in English and is also frequently used in German. It stands for "Know Your Customer", which means as much as "Know Your Customer". In the course of this, we collect certain information about you, including copies of your ID, in order to expose fakes. Your participation is voluntary, but of course remains a prerequisite for a customer account.
Why is it important to know your customer?
On the one hand, there are people who are simply forbidden to do certain business. These are then identified directly and, after further verification, rejected if necessary. However, this is very rarely the case, as these are, for example, politically exposed persons. This applies to very few people worldwide.
Another aspect are inquiries by investigating authorities. If there is a court order, the data of the person in question must be disclosed. However, this may not only affect us, but all companies that do business with the person in question. This includes telecommunication service providers, such as Internet providers or e-mail providers.
No, the police will not get your data!
A widespread idea is that investigative and tax authorities automatically have records of customers who have gone through a KYC procedure. This is not the case, because neither we nor the authorities are allowed to do that!
Every release has strict requirements which must be met by a corresponding resolution. Authorities must also comply with these requirements, and our actions are always governed by the applicable laws and regulations. Accordingly, customer data is a valuable asset, which is protected by us at all times.
Furthermore, you should ask yourself an important question in advance: Why should the authorities request your data? As long as there are no relevant suspicions, there will be no requests. In this sense, "Big Brother" will certainly not look over your shoulder.
KYC protects you from fraud
Unsuspecting users become victims of various attacks and fraud attempts very often. The procedures of the perpetrators are very different. So, if you go through the KYC procedure with us, you are not only making a contribution against money laundering. At the same time, you increase your account security.
In case of doubt, we have your personal data and can use it for a comparison if your account is threatened. This is the last line of defence, but it's better to have it than to do without it and then all of a sudden needing it.
To increase your protection, you should create strong passwords and manage them with a password manager so that you create a unique password for each account. It is also recommended to protect all accounts with 2FA. You even have to protect your LiteBit account like this, because 2FA is a must have!
Your freedom will not be restricted
As far as your freedom of transaction is concerned, there are also no restrictions imposed by KYC. Of course, we can see where the crypto or the Euros you deposited came from. But we would know that even without KYC and the same applies to withdrawals.
Everything that comes out of your personal wallet is entirely in your hands. Your LiteBit wallet is basically the same. Only if an address belongs to a known scam or can be assigned to other unwanted activities, we will intervene. But this is only for your protection!
Think of the Twitter hack and all the money that users have lost because they fell for the scam. Only if you mark the addresses of scammers and lock them out, you can take effective action against them.
Otherwise you can send all your crypto to wherever you like.