🚨As someone who has worked at an exchange for 6 years, let me explain the risk control measures in exchanges for beginners

01/ KYC: Know Your Customer

✅The platform collects detailed information about customers for analysis.

✅First, determine if the customer is a sensitive individual, such as those under international sanctions, terrorist organizations, political figures, etc. (Usually verified using third-party platform data, such as #Dowjones, #LexisNexis, and other list databases)

✅Classify customers based on risk levels (Risk Assessment) according to parameters such as country, occupation, sensitive individuals, etc.

✅Each risk level has different tolerances for using the exchange.

02/ KYT & KYA: Know Your Transactions and Wallet Assets

✅KYT & KYA are on-chain analysis tools that monitor transactions when the exchange interacts with on-chain addresses.

✅On-chain addresses are mixed, and can be categorized into black market, dark web, sanctioned addresses, hacker addresses, etc.

✅Generally, third-party databases are accessed to make judgments, such as @elliptic, @chainalysis, @SlowMist_Team, etc.

✅People engaging in over-the-counter trading should be very cautious about the source of the other party's wallet address, as they might be directly flagged by the exchange's risk control.

03/ Transaction Behavior Monitoring

✅Abnormal transaction monitoring: high-frequency small transactions, unusually large withdrawals, high-frequency cross-currency transactions.

✅Money laundering behavior monitoring: inflows and outflows in a short period, fund transfers between multiple accounts.

Each exchange operates dozens to hundreds of risk control rules.

✅Suspicious transaction reports: After hitting a risk control rule, an analysis is conducted, and if the transaction is deemed suspicious, it is reported to regulatory authorities.

04/ Market Manipulation

✅Account behavior monitoring: frequent two-way transactions, transaction times extremely close together, profit and loss deviating from normal logic.

✅Account correlation monitoring: multiple accounts using the same IP address/device fingerprint for trading, frequent interactions with on-chain addresses.

✅Order book monitoring: order book being deepened and then instantly withdrawn, unusual concentration of transaction volume.

05/ Market Maker Risk Control

✅Access and qualification review, such as background checks and agreement constraints, signing clear service agreements.

✅Transaction behavior monitoring: quoting standards, abnormal transaction monitoring, cancellation rate limits, trading volume requirements.

✅Funds and risk management: margin requirements, fund isolation, leverage limits, clearing mechanisms.

✅Market volatility response: circuit breaker mechanisms, dynamic adjustment of price spreads, liquidity guarantees, etc.