You can break down the basic activities of a regulator or cryptocurrency exchange into three steps:
1. Suspicious activities, such as large inflows or outflows of funds, are automatically flagged or reported. Inconsistent behavior, such as an increase in the number of withdrawals from a typically low-activity account, is another example.
2. During or after an investigation, the user’s ability to deposit or withdraw funds is stopped. This action cuts off any more possible laundering activities. The investigator then makes a Suspicious Activity Report (SAR).
3. If there is evidence of illegal activity, the relevant authorities are informed, and the evidence is supplied. If stolen funds were found, they would be returned to their original owners when possible.
Cryptocurrency exchanges typically take a proactive approach to AML. With the vast amount of compliance pressure placed on the crypto industry, it’s standard for exchanges like Binance to be more vigilant and cautious than required. Transaction monitoring and enhanced due diligence are the two key tools in fighting money laundering schemes.