> For the complete documentation index, see [llms.txt](https://docs.fairway.global/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.fairway.global/developers/core-concepts/decentralized-vaults.md).

# Decentralized Vaults

### Compliance Context

#### FATF & AML Requirements

* **Customer Due Diligence (CDD)** → Collect and verify customer identity documents.
* **Record Keeping** → Maintain records for 5–10 years, available for regulators on request.
* **Sanctions Screening** → Check against updated lists (UN, OFAC, EU, local).
* **Ongoing Monitoring** → Reassess at regular intervals or when risk events occur.

#### KYC Regulations

* **Document Verification** (passport, national ID, proof of address).
* **Risk-based Approach** → Different levels (KYC1, KYC2, Enhanced Due Diligence).
* **Accreditation/Eligibility** → Investor class checks for RWA access.

#### GDPR / eIDAS

* **Data Minimization** → only necessary data collected.
* **Right to Erasure / Portability** → users can revoke and migrate.
* **Encryption & Scoped Access** → Vault encrypts data at rest and in transit.
* **Separation of Concerns** → Vault handles PII; blockchains only handle proofs & commitments.

***

### Architecture

```mermaid
flowchart TD
  subgraph Off-Chain [Off-Chain Layer]
    U[User submits KYC data] --> V[Fairway Vault encrypted decentralized storage]
    V --> A[Fairway Cloud Agent Witness]
    A -->|ZK proof| M[Midnight Compact Circuit]
  end

  subgraph On-Chain [On-Chain Layer]
    M --> L[Midnight Ledger: Proof UTXO]
    L --> C[Cardano Merkle UTXO]
    L --> E[EVM EAS Attestation]
    C --> D[dApp/Protocol Guard]
    E --> D
  end

```

***

### Data Lifecycle

1. **Collection** → user submits KYC docs to Vault (off-chain, encrypted).
2. **Verification** → Cloud Agent validates docs (document checks, sanctions screening, AML rules).
3. **Proof Generation** → Witness calls Cloud Agent and Compact circuit produces ZK-proof bound to a wallet address.
4. **Recording** → Proof stored as a UTXO on Midnight (immutable audit trail).
5. **Reference** → Merkle roots (Cardano) or EAS attestations (EVM) include `midnight_ref` and Fairway signature.
6. **Usage** → dApps only check eligibility flags; no direct access to PII.

***

### Data Model (Vault Entry)

```json
{
  "user_id": "uuid-v4",
  "wallets": ["addr1...", "0xabc..."],
  "kyc_level": 2,
  "jurisdiction": "EU",
  "accredited": true,
  "sanctions_status": "clear",
  "docs": {
    "passport_hash": "sha256:0x123...",
    "proof_of_address_hash": "sha256:0x456..."
  },
  "created_at": "2025-09-22T10:15:00Z",
  "updated_at": "2025-09-22T11:00:00Z"
}

```

***

### Compliance Properties

* **FATF R.10 / R.11 (Recordkeeping)** → Vault maintains secure audit trail; regulators can request full trace via `midnight_ref`.
* **AML Directives (AMLD5/6, EU)** → sanctions screening + enhanced due diligence supported by Vault Agent workflows.
* **GDPR Articles 5 & 25 (Minimization, Privacy by Design)** → only commitments/flags on-chain, never PII.
* **eIDAS** → cryptographic signatures and proofs meet EU electronic trust service requirements.
* **Auditability** → any `midnight_ref` can be checked against Vault + Issuer records under regulator supervision.

***

### What Vaults Are (and Are Not)

* ✅ **Are** → encrypted, decentralized KYC data stores aligned with FATF/AML/GDPR.
* ❌ **Are Not** → on-chain databases (no PII ever published).
* ❌ **Are Not** → public APIs for dApps (only the Witness Agent reads them).
* ❌ **Are Not** → proof stores (ZK-proofs live on Midnight).

***

### Benefits

* **Privacy-first** → regulators can audit, but protocols see only “YES/NO”.
* **Regulatory alignment** → satisfies FATF, AMLD, KYC, GDPR/eIDAS simultaneously.
* **Future-proof** → Vault workflows adapt to new directives (e.g., FATF Travel Rule, MiCA).
* **Trust-minimized** → Fairway signature + Midnight proofs decouple compliance checks from raw data custody.

***

### Next Steps

* See Witnesses → how Cloud Agents read Vaults and generate proofs. (Not public yet)
* [Learn Zero-Knowledge Proofs (Midnight).](https://docs.fairway.global/~/revisions/ANJ44LbwfWAXIHTM56W0/developers/core-concepts/zero-knowledge-proofs-midnight)
* [Explore Compliance Guides for regulator mapping.](https://docs.fairway.global/~/revisions/LmhbGZ8szY6vRl5kdqPa/learn/compliance-and-risk-management-guides)