Money laundering is the process by which criminals transform illegally obtained funds (such as those from financial fraud, drug trafficking, terrorism, etc.) into clean, legitimate money. The process of money laundering generally involves three stages:
1.1 Placement: This stage involves placing illicit funds into the financial system (e.g., banks). Perpetrators try to make their actions appear legitimate by repaying debts, mixing the illegal funds with legitimate income, investing, exchanging foreign currency, and other related schemes.
1.2 Layering: In this stage, the criminals transfer the illegal funds through various means multiple times to make it difficult to trace. Using cryptocurrencies for transfers is one of the methods used for this purpose.
1.3 Integration: At this final stage, the "cleaned" money is taken out and deposited into the financial system for legitimate use.
Anti-Money Laundering (AML) refers to the activities and measures implemented by institutions, platforms, and governments to prevent and combat financial crimes, particularly those involving money laundering and terrorist activities. In simple terms, it aims to prevent criminals from transforming illegally obtained funds into clean, legitimate money. AML efforts are present in various fields and not exclusive to the cryptocurrency field.
For cryptocurrency trading platforms, the following measures are typically taken when facing potential money laundering activities:
2.1 Identifying and reporting suspicious transactional activities, such as frequent trading from individual accounts, significant increases in transaction volumes, or large inflows and outflows of funds.
2.2 Freezing user accounts during investigations, preventing access to funds.
2.3 Submitting evidence to and cooperating with relevant authorities if illegal activities are confirmed. Efforts are made to return stolen funds to their rightful owners whenever possible.
MEXC, as a cryptocurrency exchange platform, maintains a strong stance against illegal activities, demonstrating a firm commitment to anti-money laundering and adhering to the implementation of relevant policies in different countries and regions.
KYC stands for Know Your Customer, which means fully understanding your customers. In simple terms, it refers to the process of identity verification, commonly known as real-name authentication.
KYC is one of the measures used in anti-money laundering efforts. Through the KYC system, businesses can obtain information about customers' identities, transaction behavior, credit status, and more, thereby preventing money laundering activities.
Cryptocurrencies have become a channel for illegal activities such as money laundering for the following reasons:
4.1 The characteristic of anonymity in cryptocurrencies increases the difficulty of AML efforts. Privacy coins like Monero (XMR) enable transactions with enhanced privacy, and mixing services represented by Tornado Cash (TORN) make it challenging to trace transactions, confounding regulators by making money laundering more convenient for illicit actors.
4.2 Cryptocurrency transactions are irreversible. Once funds are sent, they cannot be retrieved unless the recipient voluntarily agrees to a refund.
4.3 Lack of regulation in the cryptocurrency field creates opportunities for illicit actors to exploit the system.
Implementing AML measures in the cryptocurrency field helps protect the rights of legitimate cryptocurrency users and promotes the overall development of the industry. For platforms like MEXC, adhering to and enforcing AML policies is not only a contribution to the industry's advancement but also helps gain the trust of potential users and regulatory authorities, leading to better opportunities for future development.