[bitcoin-dev] BIPS proposal for implementing AML-KYC in bitcoin

[prabhat]

Hi,

I am proposing to create a AML-KYC module to control the network and also
qualify use cases in OFAC compliant way.
Here is the attached doc.

Please provide your feedback and suggestions.

Best,
Prabhat Kumar Singh
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Title: A AML KYC enforcement mechanism to regulate OFAC(and similar others) from Mining

==Abstract==
The document gives specification for dealing with mining and transactions in sactioned countries to follow OFAC regulations in Bitcoin.

==Motivation==
For so long, miners in sanctioned countries or miners with illicit motives have been able to enmasse wealth by bitcoins which might or might not have been funding wrong doings of one or many non-mainstream social activities, like terrorism, human traffiking, drugs, rights abuse and many more of similar or advance nature. It is important for bitcoin community to realise the responsibility to put a control on such elements and at the same time uphold the values of bitcoin's decentralised and democratic money system. The same applies for transactions orgininating to or from such sanctioned countries.


==Specification==
To counter this problem, an bitcoin account can be centrally created in control and/or oversight of Bitcoin Foundation which should be allowed to do 0-sum transactions with a Memo Flag of BLOCK or ALLOW. And empty memo transaction has no impact. And this should be considered in consensus protocol for transaction confirmation, to BLOCK or ALLOW transactions in an account if the immediate previous transaction is BLOCK or ALLOW in that account, respectively.

==Rationale==
The Bitcoin Foundation will act as fair play party and enforcement body to control the misuse of vast financial powers which bitcoin has. The BLOCK and ALLOW is end action of a possible upstream review process for every account on the bitcoin network. The freedom of unchecked mining, poses a certain threat today and even bigger threats in future.
Even if someone is BLOCKed due to certain clerical mistakes, the process has ALLOW functionality. And if law enforcement comes with more substantial reasons of BLOCKing an account, the same be done multiple times.
We are a world of human beings with rationale, who have abilities to talk, listen and communicate. Therefore, a human to human touch can never be negated in however powerful computerisation.

==Backward compatibility==
The new consensus protocol could seem unfavourable to some due to many reasons. After listening to all parties, even if some nodes would opt to stay in old protocol, they won't be able to join the new protocol ever. This would be a hard fork and natural cleanup of bitcoin protocol from illicit miners and users.

==Implementation==
The implementation is in progress. The detail code will be shared soon.

==Acknowledgements==
It is better to be violent, if there is violence in our hearts, than to put on the cloak of nonviolence to cover impotence.- Mahatma Gandhi