> For the complete documentation index, see [llms.txt](https://azoth.gitbook.io/azoth-white-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://azoth.gitbook.io/azoth-white-paper/resources/editor-1.md).

# Risk & Compliance Framework

## 1. Dynamic Risk Circuit Breakers

### **Price Anomaly Detection**:

Trigger trading suspension if the price of asset tokens deviates >15% from real-world valuation (verified via Chainlink oracles).

* During suspension, only limit orders within ±3% of the oracle price are allowed.
* **Tiered Liquidation System**:

| **User Tier**       | **Margin Requirement** | **Liquidation Threshold** | **Liquidation Method**         |
| ------------------- | ---------------------- | ------------------------- | ------------------------------ |
| Retail Investors    | 120%                   | 110%                      | Dutch Auction (48-hour window) |
| Institutional Users | 150%                   | 130%                      | OTC Negotiated Liquidation     |

## **2. Compliance Transaction Engine**

* **Tiered KYC/AML Controls**:

  ```
  graph TD  
    A[User Login] --> B{Asset Type}  
    B -->|Security ABTs| C[L3 Verification: Identity + Tax Residency Proof]  
    B -->|Commodity ABTs| D[L1 Verification: Phone + Email]  
    C --> E[Dynamic Trading Limit: ≤30% of Net Worth]  
    D --> F[Daily Cap: $100,000]  
  ```
* **Jurisdictional Adaptability**:
  * Automatically block IP addresses from sanctioned regions.
  * Switch compliance rules based on user GPS location (e.g., restrict U.S. users from trading unregistered ABTs).

## **3. Insurance Fund**

* **Funding**: 5% of all ABT transaction fees are allocated to the insurance pool.
* **Payout**: Up to 90% compensation for losses caused by extreme events (e.g., asset seizures, oracle failures).

## **4. Audit & Transparency**

**On-Chain Legal Docs**: Every AZT’s legal agreements and audit reports (e.g., KPMG/PwC) are stored on IPFS, with hashes immutably recorded on-chain.

**Real-Time Monitoring**: AI-driven surveillance for suspicious trading patterns (e.g., wash trading, front-running).