1  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

ConducBng  KYC  and  AML  Compliance  for  Digital  Currencies    OCTOBER,  2014  

2  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

IntroducBons  

Dmitri  Korablev  VP  Engineering,  Co-­‐Founder,  Strevus  @korabli    •  Over  20  years  experience  in  SaaS,  enterprise  data  and  process  

management,  and  financial  services  •  Former  VP  and  GM  of  Product  InformaBon  Management  at  InformaBca  

“Simple things should be simple and complex things should be possible.”

Alan Kay

Compliance  Made  Easy.  

3  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

4  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

Are  the  tradi?onal  KYC  /  AML  processes  effec?ve?  

Are  they  required?  

How  can  Bitcoin  help  disrupt  the  status  quo  in  KYC  and  other  compliance  areas?    

1  

2  

3  

5  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

Digital  RegulaBons  &  Government  Affairs  

UNITED  KINGDOM  |  The  authority  now  says  it  wants  to  ensure  “posiBve  developments”  like  bitcoin  are  supported  by  the  naBon’s  regulatory  environment.  -­‐  UK  FCA  CEO,  Mar.n  Wheatley      CHINA  |  Consumers  and  businesses  should  take  note  of  the  broader  risks  that  dealing  in  virtual  currencies  entails  and  should  exercise  the  necessary  cauBon.    -­‐  MAS  Deputy  MD,    Ong  Chong  Tee      HONG  KONG  |  ExisBng  laws  in  Hong  Kong  already  cover  acts  of  fraud  and  money  laundering  involving  “virtual  commodiBes”    -­‐  Hong  Kong  Monetary  Authority    UNITED  STATES  |  Any  financial  insBtuBon  could  be  exploited  for  money  laundering  purposes.  Therefore,  all  financial  insBtuBons  must  put  controls  in  place  to  deal  with  these  threats.    -­‐  US  Department  of  Treasury,    David  S.  Cohen    

PERMISSIVE    CONTENTIOUS  

HOSTILE    UNKNOWN    

TAXATION Innova?on   Jobs  

Monetary Policy

Financial  Crime  Courts Poli?cal  Agendas  

Consumer Protection AML KYC ATF

6  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

WHAT:  Unstable  and  inconsistent  digital  currency  regulaBon  creates  confusion  on  processes  and  standard      

 

WHAT:  Deal  with  unique  challenges  of  the  Decentralized  and    Open  system  and  the  built-­‐in  privacy  mechanism  

 

 

Bitcoin  Compliance  Today  

PROPRIETARY  AND  CONFIDENTIAL  

HOW:  Evaluate  Digital  Currencies  in    the  context  of  the  exisBng  legislaBon    

WHO/WHEN:  Unclear  implementaBon  Bmelines  and  regulatory  boundaries  

 HOW:  Allocate  budget,  implement  the  minimum  processes,  focus  on    automaBon  and  efficiency      

 WHEN:  Many  companies  are  implemenBng  the  policies  proacBvely  to  gain  compeBBve  advantage    

REGULATORS   MARKET  

7  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

• Owner  &  Responsible  Officer  &  Budget  • Documented  Processes  • Strong  Privacy  Policy    • 3rd  party  audits  

• NegaBve  news  monitoring  • TransacBon  monitoring  • Define  and  monitor  “abnormal  use”  paferns  • Understand  the  SAR  process  ahead  of  Bme  

• Engage  with  the  regulators  • Educate,  but  stay  grounded  in  reality  • Study  the  exisBng  law  and  offer  alternaBves        

• Define  CDD  and  EDD  • Automate  CDD  (consumer/retail)  -­‐  ID  verificaBon,  Screening  (PEP,  SancBons,  NegaBve  news)  • Define  Risk  levels  and  apply  Enhanced  DD  screening  • Set  up  periodic  reviews  

TradiBonal  KYC  Model  

COMPLIANCE  ORGANIZATION    &  PROCESSES    

KYC  PROGRAM  

ENGAGE  WITH  THE  REGULATORS  AND  COMMUNITY  

RISK  AND  MONITORING  

1  

2  

3  

4  

8  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

FLAT  CUSTODIAN  

•  Exchange  conduct  KYC/AML-­‐DD,    collaborate  with  the  Custodial  bank  

•  Traders  must  go  through  the  KYC/AML-­‐DD  process  at  all  exchanges  that  they  trade  at.    

•  Exchange  members  may  have  to  conduct  KYC/AML-­‐DD  on  partners.  

Digital  Currency  Exchange  Ecosystem  

9  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

Distributed  eco  system  needs  distributed  idenBty  

SHARED  DATA  NETWORK  

Re-­‐usable  Onboarding  Compliance  Data  

Portable  Profile  CerBficate  

Crowd-­‐based  velng  

Network  based  suspicious  acBvity  reporBng  

Community  Based  Client  Risk  Profile  

 

1  

2  

3  

4  

5  

10  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

SHARING  is  controlled  by  clients  with  informaBon  and  enBtlements  stored  on  the  Blockchain    STRUCTURE  OF  DATA  and  documentaBon  can  be  customized  without  central  intervenBon    ENABLES  COMMUINTY  FEEDBACK,  greater  visibility  and  reputaBon  building    Enables  WIDER  COLLABORATION  across  and  within  organizaBonal  boundaries  

P2P  Compliance  and  Digital  IdenBty  

11  Presented  @  INSIDE  BITCOINS  Las  Vegas  -­‐  October  7,  2014    

Want to learn more about how Strevus can help?  

WILL  GROW  WITH  YOUR  ORGANIZATION  through  a  plamorm  that  supports  immediate  CDD  needs  today  and  can  adapt  to  support  EDD  needs  in  the  future  

AFFORDABLE  to  purchase,    protects  against  future  costs  

EASY  TO  INTEGRATE    Minimal  Demand  on  IT  and  Ops  Resources  

Strevus  provides  a  SINGLE  SOLUTION  FOR  ONBOARDING  AND  COMPLIANCE  right-­‐sized  for  today’s  digital  currency  environment.      

Visit  Strevus  at  Booth  #  207.  Follow  us  @Strevus