CipherTrace AML Report: 65% of Top 120 Crypto Exchanges Lack 'Strong' KYC

Crypto intelligence firm CipherTrace says in its Q3 Cryptocurrency Anti-Money Laundering Report that "vast majority of popular exchanges have poor or porous KYC."

CipherTrace's report, which was published on Wednesday (November 27), provided an investigation into the security of the top 120 crypto exchanges. 

The report comes just seven months before exchanges will be required to comply with the mandate set forth by the Financial Action Task Force (FATF), an intergovernmental organization to combat money laundering and terrorist financing. The FATF’s new “Travel Rule” guidelines require strict KYC implementation to facilitate the transfer of client data between exchanges when sending crypto.

CipherTrace’s research found that "two-thirds of the 120 most popular cryptocurrency exchanges have weak or porous know your customer (KYC) practices" and that "32% of popular exchanges trade privacy coins." 

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Here are the definitions CipherTrace used for "weak", "porous", and "strong":

  • Weak KYC: "These exchanges allowed CipherTrace researchers to withdraw at least .25 BTC daily with very little to no KYC."
  • Porous KYC: "These exchanges require some sort of ID verification process."
  • Strong KYC: "These exchanges require a very strenuous KYC process, which required several steps to complete before the researchers were able to make a deposit or withdrawal."

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