The entire point of this post is asking what happens to KYC when the business goes bust and there is no employees and if they delete accounts do they delete KYC information. Alot of exchanges going bust and I'm curious
Exchanges are usually offloading their KYC verification services to third party providers, who I'm sure have a data retention policy for a minimum number of years.
I am not suspecting the case to be any different from LocalBitcoins, as the government could still subpoena whoever was handling KYC for LocalBitcoins for any individual's documents should they need them for whatever reason.
Of course, I don’t know what powers your tax inspectors have, but as a rule, in order to carry out such operations, the tax office needs to create new departments and train people, and this procedure must comply with the law. In Russia, for example, initiative is punishable, and if the prosecutor’s office receives many complaints from citizens about violation of the law from such an initiative, then the author of the initiative and his assistants will have to take early retirement or look for work elsewhere.