Compliance 101: What You Need To Know

Compliance may sound like a technical term, but it really just means 'to comply' or 'to be compliant'. If a police offer stops me in the middle of street and asks if he can search me for drugs, I must comply. If I do not comply, he can arrest me on the spot. Likewise, in Crypto every payment must go through a strict search before it can be accepted. This is known as due diligence, or DD for short.

In compliance we use two types of due diligence, simple and enhanced (SDD and EDD). Upon arrival to the system, every payment will be met with a simple due diligence check, a screening against the database for any red flags. If I arrive at border control with nothing to declare, I can pass through the green gate without any issues. If however I am carrying an extra large bottle of rum I picked up on my holiday in Cuba, I must go through an enhanced check. This is where enhanced due diligence comes into play.

If anyone sends a payment for a questionably large amount, or does so from a certain jurisdictions such as Cuba, they must go through an enhanced due diligence check. The enhanced check is much like the interrogations you see on Border Force. The suspect's ID must be verified against the database, and they must be cleared of any past criminal activity to pass over the border. If they lack the necessary documents or have a blatant criminal background, they can be sent back to their country.

After the enhanced check is complete and compliance managers have come to a decision, the payment can either be accepted and sent on to the receiver, or it can be rejected and sent back to the country it came from. Once the payment has been cleared on the system, the compliance process is now complete. Job done. Now we can all go home and enjoy a neat glass of whiskey (or rum if you happen to be holidaying in Cuba).