What does verification of the source of funds involve?

As a licensed exchange operating under the Estonian license “Providing a virtual currency service,” zondacrypto is subject to the provisions of the Estonian Anti-Money Laundering and Terrorist Financing Act of October 26, 2017. This means that we are legally obliged to apply so-called financial security measures, including monitoring business relationships with customers and determining and verifying the sources of funds deposited on the exchange (§ 23(2)(3) of the AML Act).

The verification of the source of funds is aimed at counteracting money laundering and terrorist financing. We decide on an individual basis which customers should undergo this process, based on: risk assessment, customer activity, and information collected during the KYC (Know Your Customer) procedure.

In practice, this may mean that documents confirming the legal source of funds must be presented, e.g.:

• confirmation of bank transfers,
• transaction history from other exchanges,
• tax returns,
• documents confirming the receipt of a donation or inheritance,
• information about income from cryptocurrency mining.

According to the law, a customer's statement alone is not sufficient – it must be supported by documentation (§ 23(2)(3) of the AML Act).

AML verification complies with the provisions of the GDPR, as the implementation of the AML Act is in the public interest (§ 48(2) of the AML Act). This means that zondacrypto not only has the right but also the obligation to collect and process this data.

If it is not possible to determine the source of the funds, zondacrypto is required by law to refuse to continue the business relationship. This means that the cooperation may be terminated without notice (§ 42(4) and § 44(1) of the AML Act). In such situations, the funds may only be returned to a bank account in the European Economic Area, after prior conversion of the cryptocurrency into FIAT currency.