What is PSAN and Why Does It Matter for KYB?
PSAN represents France's pioneering approach to cryptocurrency regulation, established under the PACTE Act of 2019. This framework created the first comprehensive regulatory structure in Europe for digital asset service providers.
Key Differences from Traditional Financial Services
PSAN KYB compliance addresses unique challenges specific to cryptocurrency operations:
- Digital asset custody requirements: PSAN providers must implement specialized custody protocols for digital assets, requiring enhanced security measures and segregation of client assets from company assets.
- Multi-jurisdictional complexity: Cryptocurrency transactions often cross multiple jurisdictions simultaneously, requiring KYB processes that can verify business entities across different regulatory frameworks.
- Technology-specific risks: Digital asset services face unique risks, including smart contract vulnerabilities and cryptocurrency-specific fraud patterns that traditional KYB processes may not address.
- Enhanced transparency requirements: PSAN providers must implement detailed reporting and monitoring systems, including real-time transaction monitoring and enhanced suspicious activity reporting.
Core Requirements for PSAN KYB Compliance
1. Enhanced Business Verification Framework
PSAN KYB compliance requires comprehensive business verification that goes beyond traditional financial services. PSAN providers must identify and verify the entire ownership structure of business clients, including all shareholders, directors, and beneficial owners, while implementing enhanced due diligence procedures that include verification of business licenses, regulatory approvals, and compliance status in all jurisdictions where the client operates.
This framework also demands digital asset-specific risk assessment to evaluate the particular risks associated with each client's intended use of digital assets, coupled with enhanced procedures for verifying the legitimate source of digital assets and fiat currency deposits.
2. Strengthened Identity Verification Requirements
PSAN KYB implementation must include robust identity verification measures that encompass multiple layers of security and authentication. This includes implementing advanced authentication methods such as biometric verification and hardware tokens, while deploying cutting-edge document verification technologies, including OCR and authenticity checks.
The system must also provide continuous monitoring of client identity information to detect changes in business structure or ownership, supported by video-based identity verification procedures for key personnel of business clients to ensure comprehensive identity assurance.
3. Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT)
French PSAN KYB compliance requires comprehensive AML/CFT measures aligned with 5AMLD . This involves developing sophisticated risk assessment models that evaluate clients based on multiple factors, while implementing real-time transaction monitoring systems specifically designed to detect suspicious patterns unique to cryptocurrency transactions.
The framework must establish clear procedures for reporting suspicious transactions to TRACFIN, France's financial intelligence unit, and implement comprehensive sanctions screening procedures with ongoing monitoring capabilities to ensure continuous compliance.
4. MiCA Transition Requirements
As France transitions to MiCA, PSAN KYB requirements are evolving to meet new European standards. This transition demands enhanced operational resilience through robust operational systems with comprehensive disaster recovery planning, while developing reporting systems that provide detailed regulatory information in standardized European formats. Organizations must implement systems ensuring compliance with MiCA requirements across all EU member states, supported by enhanced consumer protection measures, including clear risk disclosure and transparent fee structures that meet European regulatory expectations.
5. Data Protection and Privacy Compliance
PSAN KYB compliance must align with European data protection requirements through comprehensive frameworks that ensure all client data handling complies with GDPR standards. This includes establishing procedures that ensure only necessary data is collected and retained, implementing appropriate safeguards for international data transfers, and developing comprehensive incident response procedures for data breaches.
The framework must balance regulatory compliance requirements with strict privacy protection obligations, ensuring that all data processing activities meet both French financial regulations and European privacy standards.
Timeline and Implementation
Current Regulatory Status
The French PSAN KYB landscape is in transition with multiple developments:
- Enhanced PSAN registration: Since January 1, 2024, all new registrations must comply with enhanced requirements.
- MiCA preparation phase: The AMF has been accepting pre-applications since July 1, 2024.
- Regulatory guidance updates: Regulators continue publishing updated guidance documents.
Expected Timeline
Preparing Your Business for PSAN KYB Compliance
1. Conduct a Comprehensive Compliance Assessment
- Review existing KYB procedures: Analyze current business verification processes and identify gaps.
- Evaluate technology infrastructure: Assess systems' ability to handle enhanced KYB requirements.
- Assess staff competency: Evaluate team understanding and identify training needs.
- Review third-party providers: Examine outsourced services for PSAN compliance.
2. Develop a Strategic Implementation Plan
- Prioritize compliance initiatives: Create a phased implementation addressing critical requirements first.
- Budget allocation: Establish detailed budgets for technology, training, and consulting.
- Risk management framework: Implement comprehensive risk assessment and mitigation procedures.
- Performance monitoring: Establish KPIs to track implementation progress.
3. Implement Technology Solutions
- Advanced document verification: Deploy cutting-edge document verification technologies using AI and machine learning.
- Comprehensive sanctions screening: Implement robust real-time sanctions screening systems.
- Enhanced transaction monitoring: Deploy advanced analytics for suspicious pattern detection.
- Integrated compliance management: Implement comprehensive platforms coordinating all KYB compliance aspects.
4. Staff Training and Development
- Comprehensive regulatory training: Develop detailed programs covering PSAN regulation and MiCA requirements.
- Operational procedures: Create detailed SOPs for all KYB-related activities.
- Role-specific responsibilities: Define clear roles and responsibilities for compliance team members.
- Continuous development: Implement ongoing education programs for regulatory updates.
Benefits of Early PSAN KYB Compliance Preparation
Early preparation provides competitive advantages, including faster market entry, enhanced client trust, and improved brand reputation. Operational efficiency benefits include streamlined onboarding processes and reduced operational risks through comprehensive compliance systems.
Challenges and Considerations
Technical challenges include integration complexity with existing systems and cross-border data management requirements. Regulatory uncertainty requires staying informed about developments and maintaining implementation flexibility for regulatory changes.
Industry Impact and Opportunities
PSAN KYB compliance creates opportunities for cryptocurrency innovation, traditional financial integration, and RegTech development with increased demand for automated compliance solutions and advanced risk assessment tools.
How Dotfile Simplifies PSAN KYB Compliance
Achieving PSAN KYB compliance requires sophisticated technology and regulatory expertise. Dotfile's KYB solutionhelps cryptocurrency service providers meet French requirements while preparing for MiCA transition.
Our AI-powered platform automates document verification and corporate structure analysis, reducing manual review time by 80%. With access to 400+ million global business records, we provide comprehensive ownership verification and real-time AML screening against sanctions, PEP, and adverse media databases.
Dotfile offers specialized risk scoring models for cryptocurrency businesses and built-in MiCA readiness features for seamless European regulatory transition. Our automated reporting generates compliance documents for French regulators and TRACFIN submissions.
Ready to streamline your PSAN KYB compliance? Book a demo to see how our crypto compliance platform reduces costs while ensuring regulatory adherence.
