Popular cryptocurrency exchange Coinbase has received a patent from the United States Patent and Trademark Office.
This is according to an official report by Coinbase. The patent will automatically flag non-KYC compliant accounts.
The exchange first filed the patent on November 19, 2019. The system deduces a “compliance score for each one of the accounts based on the respective factors associated with the respective account.” It calculates the compliance score, taking into account different data. For instance, the client’s age, access location, account balance and a number of devices associated with the account.
The system also compares every account score to detect accounts that fall short of compliance standards. According to the patent filing, all valid records go through undisturbed. Those that seem suspicious and/or invalid are subject to suspension. Coinbase will hand over to law enforcement agents transactions that exceed $2,000. The system also continuously refreshes its compliance model using information gathered and previously flagged accounts. This way, it ensures that the records are up to date at all times.
How it operates
If an account turns out to be non-compliant, the system will automatically cross-check whether they are good or bad. It then sends the result to a feedback system designed to determine whether to close the account or not.
Besides, an account may also be flagged if research shows that its transacts with parties known to partake in criminal activities.
An extract from the filing stated that: “An investigator may be able to determine whether an account is being used for illicit activities.” Thus they need to “research on the parties of the transaction who receive or send payment.” They also have to determine if these parties are regularly partaking in illicit activities.
Coinbase and security
Security has been of utmost importance to Coinbase. This is because the crypto space has been a focal point for unscrupulous individuals to exploit unsuspecting users. In 2019 alone, crypto-related fraud and theft accounted for losses worth $4.4 billion. Coinbase also recently acquired an e-money license in Ireland.