# Compliance: KYC/AML Framework Integrating real-world assets (RWA) into decentralized finance requires more than tokenization. It also demands a robust compliance architecture that aligns with global financial regulations. OpenFi adopts a layered KYC/AML framework, where responsibilities are clearly divided between the RWA issuer and the lending protocol. *** #### 1. Issuer-Level KYC/AML Tokenized assets are created and redeemed through regulated partners such as xStocks, MatrixDock, and Asseto. These issuers are responsible for ensuring that the underlying RWA tokens themselves are legally compliant. * KYC/AML at Entry and Redemption: When users purchase tokenized U.S. Treasuries, equities, or gold with fiat, issuers perform KYC/AML checks to validate identity and screen for illicit activity. * Accredited Investor Requirements: In certain jurisdictions, issuers may restrict access to qualified investors only. * Custodian Oversight: Issuers coordinate with regulated custodians to ensure asset reserves are managed in compliance with financial regulations. At this level, KYC/AML ensures that every token entering the blockchain represents a legitimate, legally compliant claim on an off-chain asset. *** #### 2. Protocol-Level KYC/AML While issuer-level checks validate the token itself, OpenFi adds a second layer of compliance at the borrowing and lending level. This prevents misuse of RWA tokens within decentralized credit markets. * Borrowers: Participants who use RWA tokens as collateral to borrow stablecoins may be required to undergo KYC. This ensures that lending is not extended to sanctioned entities or wallets linked to illicit activity. * Liquidity Providers: Stablecoin lenders depositing into OpenFi pools may be subject to screening or whitelist mechanisms, depending on jurisdictional requirements. * AML Screening at Outflows: Loans and repayments involving stablecoins are continuously monitored to ensure that funds do not flow to high-risk or sanctioned addresses At this level, KYC/AML ensures that credit markets remain compliant, even as RWA tokens circulate freely on-chain. *** #### 3. OpenFi’s Compliance Model OpenFi does not duplicate issuer-level compliance. Instead, it enforces protocol-level safeguards that complement issuer obligations: * Hybrid Enforcement: On-chain verification of wallets combined with off-chain compliance attestations from issuers. * Selective Access: Pools may be designed as permissioned lending markets, where only verified wallets can supply or borrow liquidity. * Auditability: Compliance data is preserved in a verifiable but privacy-preserving format, enabling regulators to audit without exposing all user activity publicly. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://open-fi.gitbook.io/rwa-backed-lending-protocol/why-openfi-is-unique-for-rwa-backed-lending/compliance-kyc-aml-framework.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.