It’s true that following this process, clients might lose their funds but, is that even possible! That an exchange address be flagged?
If ever their is an AML flag on an address, isn’t that supposedly to be on the input address to the exchange rather than having an exchange output address as a flagged address? That is, in assumption that, it isn’t a hack situation on the exchange itself but even then, it would make sense having to do refunds to the exchange address as the funds doesn’t originally belongs to the client.
I think this could be looked at case by case and not fully automated. A situation where the system could flag some address having AML flags on it to be exchange related and require some diligence in its handling.
Let me explain with an example. When a client initiates an exchange, a unique address for payment is generated for them. When you deposit funds, an AML check is performed. If the AML level is acceptable, the exchange proceeds. If the funds have a high AML risk, the exchange is suspended, and a form for returning the funds is provided to the client, where they need to specify an address and click the "Send" button. The funds will be returned from the same unique deposit address to the specified return address. As a company, we do not have the legal authority to act at our discretion and decide what to do with the money; a court decision is required for that. However, we are obligated to not facilitate money laundering. In such a case, even if a client attempts to exchange stolen funds, they will not succeed. In the blockchain, it will appear as if he transferred funds from address A to address B, and then back to address A or D. Therefore, they will not be able to hide traces or launder the funds.
Okay I understand but my suggestion is exchange should be cryptocurrency to fiat and not cryptocurrency to cryptocurrency, if you want to market your service in the whole wide. We have a lot of exchanges that exchange crypto/crypto. And all the centralized exchanges do that and their services are all currencies but yours different and the method of transaction is where I am interested in. Because it looks like a mixing operating system.
We are a cryptocurrency exchange for instant cryptocurrency exchange, operating exclusively with cryptocurrencies without fiat. We have never had, do not have, and will not have functionality for mixing cryptocurrencies. There are many other CEX and DEX platforms that deal exclusively with cryptocurrencies, but that does not mean they are cryptocurrency mixing exchanges.