In Web3, the technology is rarely the bottleneck. Smart contracts scale. Wallets scale. Bridges scale. What doesn’t scale is compliance. Most projects collapse under the weight of regulators, auditors, and tax authorities because their compliance stack is stitched together, one KYC vendor here, an AML service there, and tax reporting left for year-end clean-up. That ends with chaos. In 2023, Binance paid a record $4.3 billion settlement to U.S. regulators for failures in AML and sanctions checks
AML(Anti-Money Laundering), KYC(Know Your Customer), and Tax Logic are three dimensions of a single workflow: screening, monitoring, and reporting. The most efficient way to make them operational is to write them all into a declarative YAML script.
That means your compliance stops being a messy afterthought. It becomes executable code: auditable, testable, version-controlled.
The Old Way: Compliance Buried in Code
Ask any DeFi founder how they handle compliance today, and you’ll hear the same story: scattered scripts, custom backends, brittle smart contracts. Each rule, whether a KYC verification, an AML screen, or a tax logic check, ends up hardcoded by developers. The result? Launch timelines stall, audits multiply, and institutional partners walk away.
Even the best-resourced teams face the same choke points. Regulators are watching closely, and projects that can’t demonstrate AML thresholds, enforced KYC checks, and auditable tax reporting logic will be sidelined.
The New Model: Compliance as Code
Imagine a compliance layer not buried in backend spaghetti but expressed in one declarative YAML script. Rules aren’t custom-coded. They’re written, declared, and enforced, line by line.
Think of it as a Workflow Firewall. You define the rules, the system enforces them. Every claim, mint, transfer, or withdrawal passes through these declarative gates. If a check fails, it’s blocked; if it passes, it’s executed and logged..
Example Rule
on_event: tx.received
conditions:
- name: large_inflow
when: tx.amount_usd > 10000
actions:
- run: risk.score
- if: risk.score > 75
then:
- action: flag_for_review
- action: emit_sar_record
- else:
- action: credit_wallet
- action: emit_tx_log (carf_format: true)
Readable by engineers, auditors, and even regulators. Versionable in Git. Deterministic in execution.
Scenario One: Onboarding + Monitoring + Reporting in One File
Let’s say you’re running a fiat on-ramp:
User signs up. A KYC check verifies identity, checks against sanction lists, and assigns a tier.
Funds arrive. The deposit triggers an AML check, risk score pulled from an external oracle.
Decision point. Large inflows from high-risk wallets are frozen and escalated. Low-risk flows are credited instantly.
Tax log. Every transaction, regardless of risk, emits a record shaped for CARF or IRS requirements.
A single YAML script defines one logic path with zero duplication..
Scenario Two: Suspicious Outbound Flow
Outbound transactions are where regulators often focus. A declarative rule could look like:
on_event: tx.sent
conditions:
- name: outbound_high_risk
when: tx.destination_country in ["IR", "KP", "RU"]
actions:
- action: freeze_tx
- action: emit_sar_record
- action: notify_compliance_team
This rule executes in milliseconds, with no batch jobs and no manual reviews later.
The Stakes Are Real
Running AML, KYC, and Tax Logic as one declarative YAML workflow isn’t a theoretical architecture. The data proves it:
The 2025 theft trajectory is 17% worse than 2022, and already over $2 billion stolen in under half a year.
ByBit’s mega-heist of $1.5 billion is nearly 69% of all service thefts in 2025.
IRS enforcement is stepping up. Missing or misreporting crypto can trigger civil fines of up to $100,000 and up to 5 years’ prison.
The 2024 Crypto Crime report found that $24.2 billion in crypto transactions were tied to illicit activity.
Not only do compliance failures cost fines, but they also freeze banking relationships, block licensing, and collapse trust.
Why Merge AML, KYC, and Tax Logic?
Splitting AML checks, KYC onboarding, and tax reporting into separate systems is how contradictions creep in.
A user cleared by KYC but blocked by AML still gets logged as “valid” in tax systems.
A suspicious outbound flow gets flagged, but the same transaction gets logged as taxable, without a SAR attached.
An address exempted for AML isn’t reflected in the tax export.
By merging them into a single declarative YAML workflow:
Consistency. One decision surface.
Auditability. Every action is tied to a rule, with inputs and outputs traceable.
Latency. Seconds, not hours.
What YAML Won’t Fix
Let’s be clear. Declarative YAML scripts make compliance rules executable, but they aren’t one-size-fits-all. They won’t:
Replace bad data sources. If your sanctions list is outdated, your rules are worthless.
Solve jurisdictional ambiguity. Some DeFi products don’t have a clear reporting entity. YAML can log, but law is still law.
Remove human judgment. Escalated cases still require compliance officers.
But YAML does give you a deterministic execution layer for 95% of cases that shouldn’t require debate.
How to Start, Without Burning the House Down
You don’t need to rebuild your compliance stack overnight. Start small:
Pick three policies you already enforce manually: onboarding, large inbound, and suspicious outbound.
Write each as a YAML rule.
Hook them into your event stream.
Emit audit logs in CARF/IRS-friendly JSON.
Run against historical data.
You’ll find holes you didn’t know you had. And you’ll have a playbook you can scale.
Where Kwala Fits
Kwala isn’t a dashboard or a plug-in; it’s an execution layer designed for event-driven YAML scripts that listen, enforce, and emit. Think of Kwala as the sharp accomplice, the one who makes sure your rules fire every time, without hesitation.
Instead of manually coding KYC checks or building ad-hoc AML monitors, you declare your compliance logic in YAML. Kwala handles the rest, executing workflows in real time, calling out to Web2 APIs, gating on-chain behavior, and recording every decision with cryptographic proofs.
AML checks, KYC verification, tax reporting, not three separate silos, but three conditions in one script. One executor. One audit trail.
The Final Takeaway
If you’re moving assets in 2025, compliance isn’t spreadsheets or paperwork; it’s code.
Write it declaratively. YAML is the format.
Run it off-chain. Kwala is the executor.
The next move is obvious: take one compliance rule you’re already using, “freeze inflows above $10k with risk >75”, and rewrite it in YAML. Run it. Look at the logs. That’s your first step toward compliance you can trust under a microscope.
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