Brokerage operations
AML screening for crypto exchanges: people, wallets and behaviour
Anti-money-laundering screening on a crypto exchange has to cover two things a traditional broker never had to think about at the same time: who the customer is, and where their coins have been. Doing either one well is manageable. Doing both without drowning the compliance team in false positives is the real work.
Screening people and screening wallets
Customer screening checks identities against sanctions and politically exposed person lists at onboarding and again whenever those lists change. Wallet screening checks the addresses a customer deposits from and withdraws to against known risk categories, such as sanctioned entities, mixing services, darknet markets and stolen funds.
Neither replaces the other. A verified customer can still receive coins from a high-risk source, and a clean wallet tells you nothing about who controls it.
Transaction monitoring
Screening catches known risk. Monitoring catches behaviour: patterns that are suspicious even when every individual counterparty is clean.
Deposits followed quickly by withdrawals with little or no trading
Many small deposits that add up to a large amount
Sudden changes in volume or destination for an established account
Activity that does not fit the customer's stated profile or jurisdiction
Keeping false positives manageable
A screening programme that flags everything is as useless as one that flags nothing, because analysts stop reading the alerts. The fix is risk scoring: combining customer risk, wallet risk and behaviour into one score, with thresholds that decide which cases are auto-cleared, which go to a first-line analyst, and which escalate.
Every decision, including every cleared alert, should carry a reason. That record is what an auditor or regulator will ask for, and it is also how thresholds get tuned over time.
Where requirements differ
Obligations vary by jurisdiction, including whether originator and beneficiary information must travel with transfers between service providers. An exchange operating in several markets should be able to apply rules per jurisdiction rather than the strictest rule everywhere, and should take legal advice on which rules apply to it.
In short
What to take away
Screen both the customer and the wallets they use
Monitoring catches behaviour that screening cannot
Risk scoring and tiered review keep false positives workable
Record a reason for every decision, including cleared alerts
Read next
See screening and monitoring together
We will walk through onboarding checks, wallet screening and the review queue on a staging environment with sample cases.