U.S.-based crypto exchange Coinbase was reportedly granted a patent by the United States Patent and Trademark Office on November 19, 2019 for its system that can track and detect non-compliant accounts.
According to Cointelegraph, the system patented by Coinbase features a scoring model that “determines a compliance score for each one of the accounts based on the respective factors associated with the respective account.”
After a score is assigned, the system compares the overall score for each account in order to detect those that do not meet existing standards.
Once the non-compliant accounts have been identified, the system will evaluate the account and send the data to a feedback system that will further determine whether the account should be terminated.
The filing with the U.S. Patent and Trademark Office stated:
“An investigator may be able to determine whether an account is being used for illicit activities by doing research on the parties of the transaction who receive or send payment and determining whether such parties are regularly involved in illicit activities. It may for example be relatively easy to determine that a party sending or receiving payment is in the business of conducting online services that may be illegal.”
Meanwhile, CipherTrace has revealed that in the third quarter of 2019 alone, losses in the economy due to crypto-related fraud and theft totalled US$4.4 billion.
Though crypto exchanges have put Know Your Customer (KYC) and Anti-Money Laundering (AML) system in place, many still question its efficiency at preventing crimes, as certain data revealed through KYC could put users at risk of identity theft, hacking and phishing activities.
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