This one is a mixed bag. KYC regulations are very useful in detecting and prosecuting money laundering and crimes like human trafficking. But ya, if this data needs to be kept, the regulations around secure storage need to be just as tight. This sort of thing should be required to be kept to cybersecurity standards like CMMC Level 3, audited by outside auditors and violations treated as company and executive disqualifying events (you ran a company so poorly you failed to secure data, you’re not allowed to run such a company for the next 10 years). The sort of negligence of leaving a database exposed to the web should already result in business crippling fines (think GDPR style fines listed in percentages of global annual revenue). A database which is exposed to the web and has default credentials or no access control at all should result in c-level exec seeing the inside of a jail cell. There is zero excuse for that happening in a company tasked with protecting data. And I refuse to believe it’s the result of whatever scape-goat techs they try to pin this on. This sort of failure always comes from the top. It’s caused by executives who want everything done fast and cheap and don’t care about it being done right.
I’m uninformed about this, but do KYC laws come into effect at some profit point or are they globally enforced. I don’t see how any small businesses could possibly afford a 3rd party audit, or how that would even scale. I agree it’s necessary, but logistically it seems problematic.
KYC thresholds vary by jurisdiction and institution type, but the short answer: in the US, KYC obligations under the Bank Secrecy Act apply to ‘financial institutions’ — a category that’s broader than banks but still defined. Crypto exchanges, MSBs (money service businesses), and broker-dealers are all in scope. A random small e-commerce shop selling widgets is not.
The audit burden you’re describing is real, but it mostly falls on the institutions that are in scope, not every business that ever touches money. The problem with the IDMerit breach is a layer removed: the banks were complying with KYC, and they outsourced the identity verification piece to a third-party aggregator. That aggregator (IDMerit) is not itself a regulated financial institution — so no FFIEC exam, no mandatory pen testing cadence, no breach notification timeline baked into their operating license.
The compliance chain stops at the bank’s front door. Everything behind that — the vendors, the data processors, the identity APIs — operates in a much softer regulatory environment. That’s the structural gap. CMMC-style requirements for third-party processors handling regulated data would close it, but that’s a different law than the one that created the data collection requirement in the first place.
Ah, makes sense it would be targeted twards banking and financial businesses specifically. Better pinch point than some random commerce. In that case audits would be less problematic, though I’m not sure why outsourcing this data is even an option with the current rules. It’s not like a business can be completely hands off in the acquisition or processing of that info.
This one is a mixed bag. KYC regulations are very useful in detecting and prosecuting money laundering and crimes like human trafficking. But ya, if this data needs to be kept, the regulations around secure storage need to be just as tight. This sort of thing should be required to be kept to cybersecurity standards like CMMC Level 3, audited by outside auditors and violations treated as company and executive disqualifying events (you ran a company so poorly you failed to secure data, you’re not allowed to run such a company for the next 10 years). The sort of negligence of leaving a database exposed to the web should already result in business crippling fines (think GDPR style fines listed in percentages of global annual revenue). A database which is exposed to the web and has default credentials or no access control at all should result in c-level exec seeing the inside of a jail cell. There is zero excuse for that happening in a company tasked with protecting data. And I refuse to believe it’s the result of whatever scape-goat techs they try to pin this on. This sort of failure always comes from the top. It’s caused by executives who want everything done fast and cheap and don’t care about it being done right.
I’m uninformed about this, but do KYC laws come into effect at some profit point or are they globally enforced. I don’t see how any small businesses could possibly afford a 3rd party audit, or how that would even scale. I agree it’s necessary, but logistically it seems problematic.
KYC thresholds vary by jurisdiction and institution type, but the short answer: in the US, KYC obligations under the Bank Secrecy Act apply to ‘financial institutions’ — a category that’s broader than banks but still defined. Crypto exchanges, MSBs (money service businesses), and broker-dealers are all in scope. A random small e-commerce shop selling widgets is not.
The audit burden you’re describing is real, but it mostly falls on the institutions that are in scope, not every business that ever touches money. The problem with the IDMerit breach is a layer removed: the banks were complying with KYC, and they outsourced the identity verification piece to a third-party aggregator. That aggregator (IDMerit) is not itself a regulated financial institution — so no FFIEC exam, no mandatory pen testing cadence, no breach notification timeline baked into their operating license.
The compliance chain stops at the bank’s front door. Everything behind that — the vendors, the data processors, the identity APIs — operates in a much softer regulatory environment. That’s the structural gap. CMMC-style requirements for third-party processors handling regulated data would close it, but that’s a different law than the one that created the data collection requirement in the first place.
Ah, makes sense it would be targeted twards banking and financial businesses specifically. Better pinch point than some random commerce. In that case audits would be less problematic, though I’m not sure why outsourcing this data is even an option with the current rules. It’s not like a business can be completely hands off in the acquisition or processing of that info.