COMPLIANCE, IDENTITY AND REGULATION

Know Your Customer (KYC) / Anti-Money Laundering (AML)

Know Your Customer and Anti-Money Laundering — the regulatory obligations requiring financial institutions to verify client identities and screen transactions for illicit activity. On-chain implementations use wallet screening, identity attestations, and transaction monitoring.

EXAMPLE

Elliptic's blockchain analytics tool flags on-chain transactions linked to sanctioned wallet addresses, enabling real-time AML screening integrated with a bank's compliance workflow.

Relevant Roles and Functions

On-chain Role
Chief AML
Financial Crime Officer
Function
AML
Blockchain Forensic Analysis
Blockchain Transaction Monitoring
On-chain Analytics
Sanctions Screening
Suspicious Activity Reporting
Wallet Risk Scoring

Related Terms

On-Chain Compliance

The embedding of regulatory requirements—KYC/AML checks, transfer restrictions, investor eligibility rules, and reporting obligations—directly into token logic or smart contracts, enabling automated enforcement at the point of transaction.

Example

Securitize embeds on-chain compliance into tokenized fund transfers so that accredited investor checks run automatically before any secondary market transaction settles.

Permissioned Blockchain

A blockchain network where participation—reading, writing, or validating—is restricted to pre-approved entities. Permissioned chains offer privacy and regulatory control suited to institutional and consortium use cases.

Example

JPM Coin operates on a permissioned blockchain, ensuring only verified institutional counterparties can initiate or receive transfers.

Regulatory Reporting

The obligation to submit transaction data, positions, and risk exposures to regulators. On-chain activity can streamline reporting by making ledger data directly auditable, though it also raises new questions about jurisdiction and data access.

Example

An immutable on-chain trade record could replace post-trade reporting to DTCC, giving the SEC real-time visibility into institutional digital asset positions.