What is a High-Risk Exchange?

High-risk cryptocurrency exchanges are characterized by a lack of customer identity verification, transactional due diligence, and legal/regulatory compliance.

Common traits of high-risk exchanges include:

  • Failure to verify customer identities

  • Failure to follow Know Your Customer (KYC) guidelines

  • Failure to prevent the creation and use of fraudulent accounts

  • Failure to respond to subpoenas and warrants

  • Failure to file suspicious activity reports (SAR) or suspicious transaction reports (STR)

  • Failure to comply with Anti-Money-Laundering (AML) and Anti-Terrorist-Financing (ATF) regulations

  • Failure to prohibit participation by sanctioned parties (OFAC, HM Treasury)

  • Failure to register as money transmitting business or money services business

  • Failure to respond to record requests from foreign law enforcement (MLAT)

High-risk exchanges are often hosted on the dark web. They may be maintained in offshore jurisdictions with a history of tax havens and banking secrecy, or in foreign countries known for public corruption, weak judiciaries or lax regulations.


Consult an Investigator

Hudson Intelligence assists law firms, businesses, public agencies and investors with cryptocurrency investigations and due diligence. Every investigation is led by a Cryptocurrency Tracing Certified Examiner (CTCE) and Certified Fraud Examiner (CFE). If you would like to discuss a potential investigation, please complete the form below. We also suggest reviewing our FAQ.