While some people may see anonymous trading as a feature of the cryptocurrency market, it can also enable problematic business practices and criminal or terrorist activity. The study found that only 26% of exchanges had a “high” level of anti-money laundering (AML) procedures, such as ongoing transaction monitoring and in-house compliance staff with experience in AML.
In the report, Coinfirm identified Binance as having a “high” regulatory risk based on “exposure to anonymous activity”, while there were several exchanges – including Coinsquare, Coinbase, Gemini and the Circle-owned Poloniex – that Coinfirm identified as “low risk” due to official licenses and strict KYC/AML policies, according to CoinDesk.
Throughout the research process, Coinfirm’s team also found that some exchanges failed to fully implement the official policies on their websites. For example, Binance users from restricted countries have allegedly been able to use the platform simply by using a virtual private network (VPN) to obfuscate their location, the online publication continues.
Moreover, many exchanges have separate legal entities that handle deposits, money transmission or payment processing in a distant jurisdiction where the regulations are lax or generally unclear. Overall, in 2019, more companies appear to offer clear disclosures and traditional KYC/AML policies than researchers originally found in February 2018.
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