Compliance, KYC & AML Framework

use.com integrates compliance requirements at the architectural level, enabling sustainable operations across multiple jurisdictions while protecting users and the broader financial system from illicit activity.

Regulatory Strategy

Multi-Jurisdiction Licensing: use.com pursues licenses in key markets:

• United States: State-by-state money transmitter licenses

• European Union: MiCA (Markets in Crypto-Assets) compliance

• United Kingdom: FCA (Financial Conduct Authority) registration

• Singapore: MAS (Monetary Authority of Singapore) license

• UAE: VARA (Virtual Assets Regulatory Authority) license

Progressive Approach: Launch in licensed jurisdictions first, expand as additional licenses are obtained.

Tiered KYC Framework

Tier 1 (Lite)

Requirements:

• Email address

• Basic personal information (name, date of birth, country)

Verification:

• Email confirmation

• Automated checks

Limits:

• Daily: $1,000

• Monthly: $10,000

Products: Spot trading only

Time to Complete: < 5 minutes

Tier 2 (Standard)

Requirements:

• Government-issued ID (passport, driver's license, national ID)

• Selfie with liveness check

• Proof of address (< 3 months old)

Verification:

• Automated document verification (95% automation rate)

• Manual review for edge cases

• Biometric matching

Limits:

• Daily: $50,000

• Monthly: $500,000

Products: Spot + margin trading (jurisdiction-dependent)

Time to Complete: < 24 hours

Tier 3 (Enhanced)

Requirements:

• All Tier 2 requirements

• Source of funds documentation

• Enhanced due diligence questionnaire

Verification:

• Manual review by compliance team

• Additional documentation may be requested

• Video verification for high-risk cases

Limits:

• Daily: Unlimited

• Monthly: Unlimited (with monitoring)

Products: All products (jurisdiction-dependent)

Time to Complete: 2-5 business days

Tier 4 (Institutional)

Requirements:

• Corporate documentation (registration, beneficial ownership)

• Board resolutions

• Compliance officer details

• AML/KYC policies

Verification:

• Comprehensive due diligence

• Background checks on beneficial owners

• Ongoing monitoring

Limits: Unlimited with dedicated support

Products: All products + OTC desk access

Time to Complete: 1-2 weeks

AML Transaction Monitoring

Rule-Based Detection

Monitoring Rules:

Large Transactions: $Alert\_Threshold = \max(Absolute\_Threshold, k \times User\_Average)$

Where k = 5 (transactions 5× larger than user's average trigger review).

Rapid Movement:

• Deposit → immediate withdrawal (< 1 hour)

• Multiple deposits from different sources

• Withdrawal to high-risk addresses

Structuring:

• Multiple transactions just below reporting threshold

• Pattern detection across related accounts

Geographic Risk:

• Transactions involving high-risk jurisdictions

• Unusual geographic patterns

Machine Learning Detection

Behavioral Models:

• Baseline establishment (30-day normal activity)

• Anomaly scoring (0.0-1.0 scale)

• Alert threshold: 0.8 for AML review

Features Analyzed:

• Transaction amounts and frequency

• Trading patterns

• Deposit/withdrawal patterns

• Geographic locations

• Device fingerprints

• Time-of-day patterns

Model Performance: 85% detection rate, 5% false positive rate (continuously improving).

Sanctions Screening

Real-Time Screening: Every transaction screened against:

• OFAC SDN (Specially Designated Nationals) list

• UN sanctions list

• EU sanctions list

• UK sanctions list

Screening Latency: < 100ms per transaction

Match Handling:

• Exact Match: Transaction blocked, account frozen, SAR filed

• Fuzzy Match (> 90% similarity): Manual review within 1 hour

• No Match: Transaction proceeds

Ongoing Monitoring: Daily rescreening of all active accounts against updated sanctions lists.

Travel Rule Compliance

Threshold: $1,000 (or jurisdiction-specific threshold)

IVMS101 Data Exchange:

For transfers exceeding threshold:

1. Collect originator information (name, address, account ID)

2. Query Travel Rule Provider (TRP) for beneficiary exchange

3. Exchange IVMS101-formatted data

4. Verify beneficiary information

5. Proceed if compliant, reject if non-compliant

Data Exchanged:

• Originator: Full name, address, account identifier

• Beneficiary: Full name, address, account identifier

• Transaction: Amount, asset, timestamp

Privacy: Data encrypted in transit, stored securely, shared only with counterparty exchange.

Suspicious Activity Reporting (SAR/STR)

Triggers:

• Sanctions match

• Unusual transaction patterns

• Structuring attempts

• Known fraud indicators

• Law enforcement requests

Process:

1. Alert generated by monitoring system

2. Compliance analyst review (within 24 hours)

3. Additional investigation if warranted

4. SAR/STR filing decision (within 30 days of detection)

5. Report filed with appropriate authority (FinCEN, FCA, etc.)

6. Ongoing monitoring of flagged account

Confidentiality: SAR/STR filings are confidential; users are not notified.

Jurisdiction-Aware Product Gating

Access Control Formula: $Access = License(Jurisdiction) \land Compliance(Product, Jurisdiction) \land Tier \geq Required\_Tier$

Example Matrix:

Product	US (Licensed States)	EU (MiCA)	Singapore (MAS)	UAE (VARA)
Spot	Tier 1+	Tier 1+	Tier 1+	Tier 1+
Margin	Tier 2+	Tier 2+	Tier 2+	Tier 2+
Perpetuals	Tier 2+	Tier 2+	Tier 2+	Tier 2+
Options	Tier 3+	Tier 3+	Not Yet	Tier 3+

Dynamic Updates: Product availability updated automatically as licenses are obtained or regulations change.

Record Keeping

Retention Periods:

• KYC documents: 7 years after account closure

• Transaction records: 7 years

• Communications: 7 years

• SAR/STR records: 7 years

• Audit trails: 7 years

Storage: Encrypted, access-controlled, geographically distributed for redundancy.

Retrieval: < 24 hours for regulatory requests.

Compliance Team Structure

Chief Compliance Officer (CCO): Reports to CEO and Board

Compliance Analysts: Monitor transactions, investigate alerts

KYC Specialists: Review verification documents

Legal Counsel: Interpret regulations, advise on compliance

Training: Quarterly compliance training for all employees.

Regulatory Reporting

Periodic Reports:

• Monthly: Transaction volume, user statistics

• Quarterly: Financial statements, compliance metrics

• Annually: Comprehensive audit, PoR attestation

Ad-Hoc Reports: Respond to regulator requests within required timeframes (typically 24-48 hours).

Continuous Improvement

Metrics Tracked:

• KYC completion time (target: < 24 hours for Tier 2)

• False positive rate (target: < 5%)

• SAR/STR filing timeliness (target: 100% within 30 days)

• Regulatory actions (target: 0)

Quarterly Reviews: Assess effectiveness, update procedures, implement improvements.

Conclusion

use.com's compliance framework integrates KYC, AML, and regulatory requirements at the architectural level, enabling sustainable operations across multiple jurisdictions. By implementing tiered verification, comprehensive monitoring, and transparent reporting, use.com protects users and the broader financial system while maintaining regulatory compliance.

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Related Sections:

• Core Principles & Design Philosophy

• Deposit & Withdrawal Architecture