A notable company has fabricated their own KYC/AML policy as quoted below:
We believe in being self-regulated and follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority. We are committed to ensure that our website or services are not used to facilitate money laundering or the funding of terrorism or any other criminal activities. To fulfill this goal, we have designed our own know-your-customer/KYC and anti-money laundering/AML information acquiring system to safeguard our customers and ensure continuous, clean barter.
As a part of identification procedure, we need to obtain certain customer identification documents including a copy of PAN card and address proof from every customer. These processes make us know who are paying us money and whom we are sending money, without which our website and services can be used for money laundering and other illicit purposes.
I believe, they'll be asking for personal identification and second residential proof. Customer's might be sending documents photocopy (b&w/Colour) or at best scanned copy of original documents or photocopy. Somewhat same method and policy used by other exchanges with little bit changes.
How can be they sure about authenticity? How they're conducting diligence for verification of Identity and address? If they're asking for PAN Card, how are they authenticating it because they don't have access to NSDL database or cross-verification facility like banks.
How many filing they've done so far to "appropriate authority" as we know that large amount of illicit transactions are being done through Silk Road like websites(currenct data is not available but approximately 2.2% of trade on Silk Road 1.0 was done through India) which is HUGE. Somewhere, these coins are being traded either on p2p like localbitcoin, through forum or established exchanges.
How can they justify their claim that website and services are not being tool of larger plot?