Mt.Gox AML/KYC Process Explained

[Mt.Gox Support]

It has been explained here over and over. Dwolla decided to change its TOS when it comes to Bitcoin, this in order to protect their clients and their company and we have no problem whatsoever with them willing to protect their business. Dwolla requires now companies like us to submit certain documentations to issue them a "Writing Consent" that allow companies like us to freely continue to do business with Dwolla. As for today and after submitted these documents several weeks ago we are still waiting fro Dwolla to get back to us putting us in a very delicate situation with the fear of being shutdown at any single instant and have the funds on our Dwolla account frozen.

Thanks, I initiated a support ticket with Dwolla and referenced this discussion thread.  I am sure that when everyone knows where the bottleneck is we will get this worked out.

Thanks, hope it will have the effect we are all waiting for, we, Mt.Gox try to do everything by the book and would love to continue working with Dwolla and comply with their terms. I personally sent an email to Ben Milne 22nd but have yet received an email from him.

How odd, I got this back from my support ticket with Dwolla:

Michael,

Thank you for the clarification, I was under the impression you were sending funds to a third party. It appears that your account is active and verified, if the payment has not reached the Dwolla system we have no control over how long the transfer will take. If another Dwolla user has initiated a transfer to your Dwolla account you will see it in your "pending" transactions or "Money In" tab. I do not see any payments being made to your Dwolla balance at this time, therefore I am not able to see what the hold up is. I would recommend getting in contact again with the third party in question, to see if the funds have successfully been sent to your Dwolla account.

Thank you,

Dwolla Support

What's up with this?

There is nothing odd here and this has nothing do to with you being a verified and active Dwolla user. The problem has I stated earlier is that Dwolla has changed its TOS and impose us, as well as other Bitcoin oriented business working with them to comply with new TOS. Only Business approved by Dwolla and that received the so call "Writing Consent" will be in the clear. As for today, after sending them everything they asked us, after personally contacted Ben Milne to get this done one way or another, we are still in the "Dark".
So in order to avoid another "Technocash" fisaco we decided to be EXTREMELY cautious with Dwolla in every aspect resulting a slowdown in Withdrawals.

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[repentance]

I think I understand what Mt Gox support is saying and hope they'll correct me if I'm wrong.  It sounds like Mt Gox is limiting the amount of user funds being put at risk by only putting a certain amount of Dwolla withdrawals through at any given time, so that if Dwolla does suddenly lock their account they will be able to reimburse users out of their own reserves rather than those funds being unavailable to users indefinitely.

TradeHill claimed in their lawsuit that they had put $2 million through Dwolla in the month prior to folding.  It's not unreasonable to assume that MtGox does a similar volume of Dwolla business but if they kept enough funds in their Dwolla account to cover anticipated withdrawals for the coming month, two weeks or whatever, they'd risk a huge amount of money being frozen at no notice.  The only way to avoid that risk is to put smaller volumes of transactions through and wait until they've been fully processed before putting any more funds into the Dwolla system.  While we don't know what their risk tolerance is, obviously larger withdrawals bring them closer to that ceiling than smaller withdrawals.

That's how I understand what they're saying, anyway.

[Mt.Gox Support]

I think I understand what Mt Gox support is saying and hope they'll correct me if I'm wrong.  It sounds like Mt Gox is limiting the amount of user funds being put at risk by only putting a certain amount of Dwolla withdrawals through at any given time, so that if Dwolla does suddenly lock their account they will be able to reimburse users out of their own reserves rather than those funds being unavailable to users indefinitely.

TradeHill claimed in their lawsuit that they had put $2 million through Dwolla in the month prior to folding.  It's not unreasonable to assume that MtGox does a similar volume of Dwolla business but if they kept enough funds in their Dwolla account to cover anticipated withdrawals for the coming month, two weeks or whatever, they'd risk a huge amount of money being frozen at no notice.  The only way to avoid that risk is to put smaller volumes of transactions through and wait until they've been fully processed before putting any more funds into the Dwolla system.  While we don't know what their risk tolerance is, obviously larger withdrawals bring them closer to that ceiling than smaller withdrawals.

That's how I understand what they're saying, anyway.

No need for correction.

[molecular]

For point 2 - We only report customers to the police relevant financial regulator when we have actual proof that they are actively involved in severe financial crimes such as money laundering or terrorist financing as we are legally obliged to do so. With regards to your particular case, I'll have to ask MagicalTux and get back to you. Would you prefer a public answer or for me to PM you?

I'm sorry to bring this up again, but I'm still unclear about your policy here. If emphasis is indeed your policy, why did you report Goat to the police? Did you have proof of him being involved in severe financial crimes or not?

[repentance]

I'm sorry to bring this up again, but I'm still unclear about your policy here. If emphasis is indeed your policy, why did you report Goat to the police? Did you have proof of him being involved in severe financial crimes or not?

They mean a suspicion as defined by AML/CTF requirements.  They're legally obliged to make the report if the transaction fits certain "suspicious" criteria.  Some things must be reported no matter what.  Others are less clear cut and may not need to be reported if the user can supply information which proves the transaction is legitimate.

It would help a lot if they re-wrote that part of their policy to make its meaning clearer.

[2weiX]

I'm sorry to bring this up again, but I'm still unclear about your policy here. If emphasis is indeed your policy, why did you report Goat to the police? Did you have proof of him being involved in severe financial crimes or not?

They mean a suspicion as defined by AML/CTF requirements.  They're legally obliged to make the report if the transaction fits certain "suspicious" criteria.  Some things must be reported no matter what.  Others are less clear cut and may not need to be reported if the user can supply information which proves the transaction is legitimate.

It would help a lot if they re-wrote that part of their policy to make its meaning clearer.

Yes, I thought the whole point of this thread was to make things clear...

i keep clicking these threads to get a clear(er) picture of what's happening, but alas!

i fail.

[molecular]

I'm sorry to bring this up again, but I'm still unclear about your policy here. If emphasis is indeed your policy, why did you report Goat to the police? Did you have proof of him being involved in severe financial crimes or not?

They mean a suspicion as defined by AML/CTF requirements.  They're legally obliged to make the report if the transaction fits certain "suspicious" criteria.  Some things must be reported no matter what.  Others are less clear cut and may not need to be reported if the user can supply information which proves the transaction is legitimate.

It would help a lot if they re-wrote that part of their policy to make its meaning clearer.

"will ONLY report ... if we HAVE ACTUAL PROOF" sounds pretty clear to me.

to be fair, I can't find this phrasing on https://mtgox.com/terms_of_service (any more?)

Is there some place (other than the one I just linked) where I can look at the effective policies mtgox is applying?

[beekeeper]

So far I only had a pleasant experience with this guys. I only exchanged several ks with them, but they are faster than my ability to produce bitcoins ...

[deus-ex-machina]

Tried to verify, but I keep getting an error. It just says "Error: undefined" when I fill out my name.

[jago25_98]

How does a company prove it's identity? Does this rule out Panamanian companies?

[ErebusBat]

How does a company prove it's identity? Does this rule out Panamanian companies?

My guess would be that a principal would sign indicating such.  Give them a call; it wouldnt be the first time Mt Gox has this situation.

[jago25_98]

How does a company prove it's identity? Does this rule out Panamanian companies?

My guess would be that a principal would sign indicating such.  Give them a call; it wouldnt be the first time Mt Gox has this situation.

Got a reply:

For Businesses
1. Certificate of incorporation/registration
2. Identity & address verification of shareholders entitles to 10% or more in voting rights
3. Company constitution or articles of memorandum and a
4. Copy of Trust Deed for the Trust involved as part of shareholders (if any)
If your documents are not in english, or do not have latin script, they need to be translated and then notarized before uploading.

Note: Bank statements are not accepted.

Kindly upload any one of both Photo ID and Residence proof to https://mtgox.com/forms/verification for verification.

No.2 goes beyond a lot of corporate banking requirements and NYC and is probably an error.
 
I guess to maintain privacy you should be able to incorporate an additional separate company for no.2 but in practice they'd probably just ignore principles.
(you can't forge a contract between a company and a natural person, only company to a company such as a sole trader). So requesting things that are associated with the natural person such as a photo is misleading, even if it is a very common mistake to see.

So, how do the competition rate for KYC? Are the other exchanges doing it properly?

[ErebusBat]

So, how do the competition rate for KYC? Are the other exchanges doing it properly?

What is not proper?

[jago25_98]

So, how do the competition rate for KYC? Are the other exchanges doing it properly?

What is not proper?

I think asking for ID on 10% of shareholders is not KYC guidelines. Can anyone confirm?

[Mt.Gox_Alex]

So, how do the competition rate for KYC? Are the other exchanges doing it properly?

What is not proper?

I think asking for ID on 10% of shareholders is not KYC guidelines. Can anyone confirm?

Based on which jurisdiction? A Guideline is a Guidline and you can implement many other options on top of it in order to strengthen your security.

[jago25_98]

just use someone else's details...

[matmar10]

So, how do the competition rate for KYC? Are the other exchanges doing it properly?

What is not proper?

I think asking for ID on 10% of shareholders is not KYC guidelines. Can anyone confirm?

As in, KYC on any shareholder who has a 10% or more equity stake in the controlling company. This is standard KYB (know your business) practice and is generally required for any business that gets acquired to process credit card payments, for example.

[repentance]

I think asking for ID on 10% of shareholders is not KYC guidelines. Can anyone confirm?

As in, KYC on any shareholder who has a 10% or more equity stake in the controlling company. This is standard KYB (know your business) practice and is generally required for any business that gets acquired to process credit card payments, for example.

In a lot of places it's standard in order to be able to even register or acquire shareholdings in a private company (and it definitely applies for shareholdings over a certain % in public companies).  Many financial institutions also require that any signatories on a business account fully verify their identities in addition to the business itself verifying.

There are many things which can trigger enhanced KYC requirements and ongoing customer due diligence is an actual requirement of AML compliance.  Each organisation has to develop its own framework for these processes, but the penalties for non-compliance are so huge that entities tend to err on the side of caution and try to exceed the required standards (which are often only laid down as broad principles) rather than risk falling short of compliance.  

[franky1]

although skipping some posters i did read MTGox's posts. i will make this post based on my observations as some readers still seem unsure.

MTGox is not making your private bitcoin trades public knowledge. but they do have to account for the FIAT that crosses peoples hands.

it would be a far worse place if KYC was needed for even the small penny trades.. so be thankful for that guys.

other exchanges that don't ask for identification, don't accept bank transfers direct thus the banking regulations don't apply directly. they instead use money-gram or other go betweens for their small amounts reducing them of so many compliance issues in regards to FIAT handling.

what you do with your bitcoin is whatever you want. but if you want fiat, then you have to accept the fiat laws.

if you are claiming you want complete anonymity even when requesting FIAT. Then do yourselves a favour and don't cash out into FIAT. you cannot change FIAT laws by complaining on a website forum.
Instead get out of your computer chairs and get the real world merchants that you use to start taking bitcoin direct instead. then FIAT laws wont apply to you.

EG: get your local 7-11 to accept bitcoin, along with your local pizza place.

if you know of a handful of people in your town that use bitcoin, then get together and plan out how to avoid fiat laws.
EG: when bitinstant release their prepaid card. get the 7-11/pizzaplace manager to order one. and then when u get your food ask the manager for his cards bitcoin address so that you can pay for your food.
then tell all your friends that if they ask the manager they can pay him using a bitcoin address. while the manager knows he will receive FIAT to his card.

he of course would go through AML/KYC checks not you. thus solving your anonymity issues.

[jago25_98]

Oh dear.

After this I switched to Bitstamp using my online handle name and setup Google Authenticator. I then had my phone stolen last week. They are now asking for ID to disable the Google Auth, which of course I don't have since the name I signed up with doesn't exist...

 it's not a small balance and it's in dollars, not BTC.