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Codefi

Launches Codefi Compliance

by Nicole AdarmeJune 9, 2020
codefi compliance hero

In recent years, regulatory requirements for digital assets have increased significantly to keep up with the pace of technological innovation in the financial services sector. Any entity interacting with digital assets and tokenization— exchanges, asset managers, custodians, and emerging DeFi platforms— has to meet specific requirements to prevent fraud, market manipulation, cybercrime and cybersecurity breaches.

The ability to tokenize financial instruments on decentralized networks unlocks new capabilities for financial services and the leading institutions are eager to reap the benefits of this innovation. According to a survey of US-based asset managers issued by State Street Advisors, 62% of clients say tokenization will improve risk management. Yet, compliance is often evaded and our industry bears the cost. Hacks, exit scams, and misappropriation of funds fraud cost cryptocurrency exchanges, investors and users US$4.26 billion in the second half of 2019.

On the institutional side, banks globally have spent in excess of $270 billion per year on compliance and regulatory obligations, with 10-15% of total workforce dedicated to governance, risk management and compliance due to the complexity of operating in multiple jurisdictions. To fully realize the potential of digital assets across institutional and decentralized finance, the market needs robust, customizable anti-money-laundering (AML)/ countering-the-financing-or-terrorism (CFT) solutions with automated compliance capabilities that provide coverage for global jurisdictions from one platform.

To address this need, ConsenSys has launched Codefi Compliance, an automated and agile regulatory and compliance platform for cryptocurrency and digital assets. As a next-generation solution for AML/CFT, Codefi Compliance ensures digital assets meet regulatory expectations without compromising market and business requirements. It is the only compliance solution designed exclusively for Ethereum-based assets.

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“Codefi Compliance is built for any business interacting with digital assets on Ethereum. Products like Sight are using Codefi Compliance to ensure transactions using tokens comply with local regulations.”

— Graeme Barnes, Product Manager of Sight, A Decentralized Prediction Market Platform

Historically, AML/CFT compliance has leveraged know-your-customer (KYC) guidelines, which require financial services institutions to make an effort to verify the identity, suitability, and risks associated with engaging its customers. But next-generation compliance analysis for decentralized infrastructure demands know-your-transaction (KYT) capabilities which evaluate the behaviour of participating addresses rather than participant identity, preserving privacy and providing essential AML insights without obtaining any personally identifiable information. Codefi Compliance delivers advanced compliance capabilities that include KYT frameworks, high-risk case management, and real-time reporting.

Codefi Compliance empowers clients to perform compliance risk assessment using advanced tools for risk management, evaluation, and investigation. Users can manage global operations from one account by adjusting compliance settings according to jurisdiction, seamlessly managing multiple settings across international divisions. Codefi Compliance provides real-time compliance oversight and risk status for all digital assets with filters for labels, identified attributes, transaction compliance, and risk level. Clients can track asset activities, user behavior, transactions, fund flow and view data analysis for spot trends. Insights derived from Codefi Compliance can help businesses facing dynamic regulations to ensure all requirements are met without interrupting process flows.


Risk Management Interface on Codefi Compliance

Risk Management Interface on Codefi Compliance


Risk Assessment Interface on Codefi Compliance

Risk Assessment Interface on Codefi Compliance


Risk Investigation Tool on Codefi Compliance

Risk Investigation Tool on Codefi Compliance

Ethereum continues to gain momentum as the programmable blockchain of choice for enterprises, as the majority of the world’s largest companies using blockchain are building on Ethereum. Prior to Codefi Compliance, businesses dealing with digital assets on Ethereum faced the challenge of addressing various standards and implementations for each asset and managing the network’s complex database. Codefi Compliance uses a custom framework to provide an AML/CFT solution compatible with Ether and the most widely used token standards such as ERC20, ERC721, ERC179, ERC777, along with notable stablecoins like DAI, USDC and Tether, covering over 280,000 types of digital assets built on Ethereum. It is the first solution built for digital assets that will run on ETH 2.0, the much-anticipated network upgrade that will exponentially increase transactions per second and enable Ethereum scale.

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“Providing robust AML/CFT compliance for Ethereum-based digital assets is a keystone step in bringing the institutional financial industry to decentralized finance. Codefi Compliance is the next module in our product suite to eliminate complexity and risk in using DeFi, and help any business benefit from using digital assets.”

— Lex Sokolin, Global Co-Head of ConsenSys Codefi

Codefi Compliance is built for any business interacting with digital assets on Ethereum. Crypto exchanges and tokenization companies can apply Codefi Compliance’s tools to their user onboarding and trading interactions. KYC and compliance firms seeking to provide fully packaged compliance services including off-chain (ID/Passport) and on-chain data verification, can integrate Codefi Compliance’s functions into their larger AML frameworks. Developers can rest assured that their users don’t have to sacrifice privacy in order to remain compliant across any jurisdiction. Lastly, regulators performing due diligence on cryptocurrency and digital asset entities can utilize Codefi Compliance to cross-verify existing due diligence efforts.

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“As a non-custodial prediction market platform, Sight was looking for a crypto AML solution that would be easy to integrate, user-friendly, and applicable to all Ethereum tokens. Codefi checked all the boxes, giving regulators peace of mind that Sight is meeting the highest of AML standards.”

— Graeme Barnes, Product Manager of Sight, A Decentralized Prediction Market Platform

For more information, check out codefi.consensys.net/compliance


Get started with Codefi Compliance today by reaching out to the Codefi team for a full platform demo!