Verifying your identity on crypto exchanges in South Africa

When you first register on a bitcoin exchange, one of the first things you need to do is to verify your account. Many users are apprehensive about providing their identification documents and bank account details to an exchange and do not understand why this information is necessary.

Limitations for new accounts

Most cryptocurrency exchanges require users to verify their identity or have a verified account in order to make withdrawals, or have the limitations on the amount they are able to withdraw removed. Once your account is fully verified, the limitations are removed, and you can generally deposit and withdraw as much as you want.

This verification process that exchanges use is a “Know your Customer”, and “Anti Money Laundering” (KYC/AML) verification check. The process of submitting identification documents, proof of residence, bank account details etc, enables the exchange to identify and verify the identity of its users.

Why do exchanges have KYC/AML?

Having KCY/AML procedures in place allows the exchange to meet regulatory compliance and to make sure that its services aren’t being used for criminal activities such as money laundering or terrorist financing.

Exchanges have a huge responsibility to make sure that no “dirty money” gets processed, that is money from accounts that are not verified with proper KYC/AML procedures in place.

For bitcoin and cryptocurrencies to be seen in a good light, and to one day go ‘mainstream’, the exchanges need to be seen as responsible entities and be in good standing with the regulators, the FIC, SARS and SARB. This can only be done if they have accurate customer information, and have adequate procedures in place to make sure that the money going in and out of their bank account is going to the correct people.

In South Africa the amount of identity fraud and fraudulent transactions taking place every day is high. Cryptocurrency exchanges do not want to be seen as complicit in any form of illegal or criminal activity.

If bitcoin, cryptocurrencies or the exchanges fall foul of the law, or are used to commit crimes, this will hurt adoption and the entire cryptocurrency ecosystem. By complying with all the rules and regulations, and going above and beyond what is needed, the bitcoin exchanges are doing their part to reduce crimes using cryptocurrencies.

Exchanges might even require certain users to provide additional information on the source of funds they are wanting to deposit, and sometimes will flat out refuse a customer, closing down the account.

When it comes to money laundering and financial crimes involving cryptocurrency, the exchanges aim to be seen by the regulators as going above and beyond to make sure the users and the money on the exchange are all above board.

Exchanges are committed to complying with all current South African regulations that help prevent, detect and remediate unlawful behavior by users when using their trading platforms or any of their other services.

Providing proof of Identification

Most exchanges require a high quality scan or photograph of your ID book or passport as proof of ID. It is very common for an exchange to also ask for you to take a selfie holding the identification document and a piece of paper with the date and the name of the exchange.

The reason some exchanges do this is because it is a very fast and easy way to prove that you are the owner of the ID document that was sent through. With the high amount of identity fraud in South Africa, it is easy for people to submit a stolen ID or passport to open an account. By taking a selfie with the document, you instantly prove you are the owner.

Bank statement as proof of residence

Most exchanges will ask for a bank statement because the bank has already gone through the process of verifying your address when you FICA your bank account. If you can supply a bank statement that has an already verified address on it, then the exchange is generally happy.

The second reason exchanges want your bank statement is to prove your bank account details are correct so that you are able to make withdrawals. If you are going to deposit money to the exchange it also needs to come from the bank account you provide. Just to be clear, the deposits and withdrawals you make both need to come from, and go to the bank account you provide to the exchange.

Using a bank statement for proof of residence can make the verification process go quicker, as the one document answers multiple questions for the exchange.

When something goes wrong

If your account on an exchange throws up a red flag in terms of irregular or strange activity, exchanges will most likely scrutinise your account further, and could even ask for some more verification documents. Your account could be locked while some ‘Enhanced Due Diligence” procedures are done on your account.

Although this might be frustrating to have your account locked in an innocent situation, it could also save your funds if your account has been compromised. By having all users accounts verified, exchanges are able to reduce the probability of any fraudulent activity on the exchange.

Why does it take long to get verified?

The compliance department at exchanges has staff that manually check and re-check all your information and documents. This information is not always accepted at face value, it is often cross checked with banks to make sure that it is correct. If confirmation information coming back to the exchange is slow, the exchange needs to wait before continuing. Generally it can take from a couple of days, to 10 days to get your account fully verified with no limitations.

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Author: francois”