Analyst firm CipherTrace reported that more than half of international cryptocurrency exchanges have weak KYC / AML protocols and do not meet industry standards.
CipherTrace has analyzed over 800 decentralized and centralized cryptocurrency trading platforms and automated market makers (AMM). According to the survey, 56% of these platforms do not comply with the KYC and Anti-Money Laundering (AML) requirements. Oddly enough, most of these exchanges are located in Europe – in a region with a highly regulated cryptocurrency industry.
Note that on January 10, 2020, the Fifth Directive of the European Union on Combating Money Laundering (AMLD5) to combat the financing of terrorism came into force. Despite this, 60% of European Virtual Asset Service Providers (VASPs) have weak KYC protocols. The largest number of exchanges that do not comply with customer identification requirements are in the US, UK, Russia and Singapore.
According to analysts, many exchanges deliberately do not indicate the country in which they are registered on their website. This means that marketplaces can hide their jurisdiction to avoid the need for registration and regulatory compliance. According to a CipherTrace report , 70% of exchanges listed in Seychelles do not comply with KYC regulations. Therefore, Seychelles is becoming a hotbed for services that launder money through cryptocurrencies. After analyzing 21 decentralized exchanges, experts found that 81% of them have weak KYC policies or do not apply this procedure at all.
As a reminder, in April, cryptocurrency exchange Binance planned to implement the CipherTrace solution to combat money laundering, as well as to increase the level of transparency and security. However, Lazarus hackers managed to launder more than $ 100 million worth of stolen digital assets by bypassing KYC checks on cryptocurrency exchanges.