KYC/AML

Know Your Customer and Anti-Money Laundering. Regulatory requirements that financial institutions must verify customer identity and monitor transactions for suspicious activity. Most CEXs are subject to KYC/AML obligations; most DeFi protocols are not. FATF's 2021 guidance says VASPs should collect the required originator and beneficiary information from their own customer for transfers involving self-hosted wallets, and apply appropriate risk-based AML/CFT controls. It covers transfers that involve a VASP, not transfers between two self-hosted wallets, and it does not expect the information to be sent to an individual who is not an obliged entity. This tightens the compliance perimeter around unhosted wallets without fully closing it. The boundary between regulated and unregulated is where most compliance risk currently concentrates.