# Regulatory Compliance Engine

Our regulatory compliance engine ensures that all users meet the necessary standards for KYC/AML, fraud prevention, and jurisdictional compliance, while offering seamless interaction with the system. Here is the full list of checks and processes we automatically perform.

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<figure><img src="https://2693461340-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FqwrEZMZLWO79z0GMdaav%2Fuploads%2FKQKTQ4c4vh43E9sfu9g3%2FRegulatory%20Compliance.png?alt=media&#x26;token=cb7fe2ee-469e-4afa-8de9-a29fffa5a8d6" alt="" width="375"><figcaption><p>Comprehensive Regulatory Compliance Framework</p></figcaption></figure>

## KYC/AML Compliance Checks

Our automated KYC/AML system provides instant verification and risk assessment for all users.

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1. **Automatic KYC/AML Check**
   1. Instantly performs all required KYC/AML checks for users.
2. **Proof of Identity / Proof of Residency**
3. **Scoring mechanism** categorizes users into:
   1. <mark style="color:green;">**Green**</mark>: Automatic pass.
   2. <mark style="color:orange;">**Yellow**</mark>: Possible manual override.
   3. <mark style="color:red;">**Red**</mark>: Requires review and report download for filing.
4. **Country CPI Score (Corruption Perception Index)**
   1. Uses CPI score to assess risk based on the user’s location.
5. **Request Additional Documents**
   1. Examples include:
      1. Source of funds (individuals).
      2. Copy of the register of Directors (Enterprise customers).

## KYT On-Chain Analysis and Categorization

The Know Your Transaction (KYT) system provides real-time blockchain transaction monitoring and risk assessment capabilities. It enables compliance with regulatory requirements by tracking and analyzing on-chain activities, identifying suspicious patterns, and maintaining comprehensive audit trails.

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6. **Initial Address Screening**: Categorizes wallets into risk categories.
   1. Wallets would be categorized based on the rules into risk categories
      * <mark style="color:red;background-color:red;">Severe</mark> / <mark style="color:red;">High</mark> / <mark style="color:orange;">Medium</mark> / <mark style="color:purple;">Low</mark>
7. **Ongoing KYT Monitoring**: Continuous monitoring of user behavior.
   1. User Behavior alerts
   2. Risk Categories

## AI-Driven User Categorization

The system essentially transforms complex regulatory requirements into an automated, user-friendly process while maintaining full compliance across multiple jurisdictions.

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8. **Regulatory Matrix**: Set rules for licenses in different countries to ensure compliance with local regulations.
9. **Automated Categorization**: Classifies users into risk categories based on profile and behavior:
   1. <mark style="color:purple;">**Low**</mark>**&#x20;Risk**: No additional checks.
   2. <mark style="color:orange;">**Medium**</mark>**&#x20;Risk**: Possible additional verification.
   3. <mark style="color:red;">**High**</mark>**&#x20;Risk**: Manual review or restricted access.
10. **Real-Time Compliance Checks**: Continuously monitors user data to ensure ongoing regulatory compliance.
11. **Interactive Questionnaires**: Users complete dynamic questionnaires that adapt to their responses, ensuring jurisdiction-specific compliance.
12. **Eligibility Assessment**: Ensures products are offered only to users who meet eligibility requirements based on their regulatory classification.

## Fraud Prevention

Identifies suspicious activity including account takeovers, spam, and malicious bots.

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13. **Device Intelligence utilizing Smart Signals**
    1. Bot Detection
    2. Browser Tampering
    3. Device Rooting
    4. Emulator Detection
    5. Virtual Machine Detection
    6. App Cloning
    7. Jailbreak Detection
    8. Frida Detection
    9. Location Spoofing
    10. VPN Usage
    11. Incognito Mode
    12. Privacy Settings

## Geolocation Controls

14. **UK Regulatory Assessment Questionnaire**
    1. The UK Questionnaire system implements FCA requirements for crypto asset service providers, ensuring proper assessment of retail clients' knowledge, experience, and financial standing. This system complies with:
       1. the **FCA's Consumer Duty requirements**
       2. and the **UK's crypto marketing restrictions** introduced in 2024.

## Sanctions Compliance

15. **Blocking access to Blade Labs products to users from sanctioned countries** (or where crypto is illegal, e.g. China)
    1. Comprehensive list maintained in system
    2. Automatic updates
    3. Real-time checking
    4. Audit logging

| UNSC Sanction List                                  |
| --------------------------------------------------- |
| Central African Republic                            |
| China (mainland)                                    |
| Congo, Democratic Republic                          |
| Democratic People's Republic of Korea (North Korea) |
| Eritrea                                             |
| Guinea-Bissau                                       |
| Iran                                                |
| Iraq                                                |
| Lebanon                                             |
| Libya                                               |
| Mali                                                |
| South Sudan                                         |
| Sudan                                               |
| Syrian Arab Republic                                |
| Yemen                                               |
| Russia                                              |

## **OnChain Governance Controls**

16. **Token Management - Available Controls**
    1. KYC flag on the token (it cannot be handled by a non KYCd user)
    2. Wipe, Freeze, Unfreeze
    3. Cash In, Burn, Get balance
    4. Grant KYC, Revoke KYC, Check KYC
    5. Rescue

## Best Practices

17. **Regular Updates**
    1. Monitor sanctions lists
    2. Maintain compliance records
18. **Audit Trails**
    1. Keep detailed logs
19. **Emergency Procedures**
    1. Incident response
    2. Disaster recovery
    3. Regulatory reporting
    4. Account freezing
