Centralized crypto exchanges (Binance, Kraken, OKX, and others) are increasingly resembling traditional banks. In the past, trading required only an email address. Today, internal monitoring teams can block an account or request a package of documents at any time – usually after large transactions or when attempting to withdraw funds to a bank account.

 

The challenge is that exchange requests are often formulated in general terms. Users do not always understand which document confirms the legality of their income (Source of Wealth – SoW) or the origin of their funds (Source of Funds – SoF). It was with such challenges that Lawrange was approached by clients whose assets attracted the attention of compliance departments at major platforms.

 

Would you like to know how we solved the problem? All the details are described below.

 

Clients Facing Strict Monitoring by Centralized Exchanges (CEX)

Our clients were account holders on major crypto exchanges who received requests for additional verification. Among them were both private investors and business representatives using crypto assets for settlements.

 

The main difficulty was that exchanges required detailed justification of transaction chains over a fairly long period. As a result, we were tasked with:

  • Analyzing the sources of clients’ funds and aligning them with the requirements of a specific exchange.
  • Preparing documentary proof of the legality of income that would not raise additional questions from monitoring teams.
  • Advising clients on how to pass AML/KYC checks in real time.
  • Drafting responses to compliance officers’ requests to accelerate the unblocking of account functions as much as possible.

 

It is important to understand that each exchange has its own internal risk assessment algorithms. What works for one platform may be insufficient for another. Therefore, we developed an individual strategy for each case.

 

Transaction Audit and Building an Evidence Base

We approached the task as a full legal audit. Our goal was to transform a fragmented transaction history into a logical and regulator-friendly structure. During our cooperation, the Lawrange team completed the following:

  1. Internal AML analysis. We checked client addresses for potential links to high-risk sources – mixers, sanctioned platforms, and other potentially “toxic” counterparties. This was necessary for a preliminary assessment of regulatory risks.
  2. Preparation of proof of source of wealth (SoW). We systematized tax returns, property sale and purchase agreements, documents confirming dividend payments, or salary income.
  3. Drafting a supporting letter. We legally justified the economic logic of the transactions so that the exchange’s compliance manager would have no doubts about the transparency of the client’s intentions.
  4. Preparation of responses to extended KYC questionnaires. We assisted in completing specialized questionnaires. The accuracy of wording directly affects the client’s final risk profile.

 

Such preparation allowed us to form a professional compliance profile for the client. In the future, it simplifies interactions with exchanges, banks, and other financial institutions.

 

Result: Successful Verification and Access to Assets

Thanks to timely measures and properly prepared documentation, clients successfully passed compliance procedures. Most importantly, we avoided long-term blockages that typically last for months due to improper communication with exchange support teams.

 

The main results of our work included:

  • full unblocking of withdrawal and trading limits;
  • reduced account risk level within the exchange monitoring system;
  • a document package that can be used for verification on other platforms or with banks;
  • minimization of the risk of being placed on “blacklists” due to failure to provide information upon request.

 

As a result, clients were able to work with crypto assets confidently, knowing that their legal position is solid and supported by documented evidence.

 

Received a compliance request from a crypto exchange or want to prepare in advance? Lawrange lawyers will help you build a strong evidence base and protect your interests. Contact us for a consultation!