Huobi targets money laundering, fraud

Cryptocurrency exchange and derivatives platform Huobi Group announced today that it has launched a new analytics tool aimed at detecting and preventing money laundering, fraud, illegal dark web sales, and even price manipulation.

Star Atlas will monitor on-chain transactions and activities “in real time to identify and flag suspicious or problematic transactions for further investigation,” the company said in an April 13 release.

“It’s estimated that only a small percentage of cryptocurrency transactions are illicit, but any incident—regardless of size—is a stain on the entire industry,” said Ciara Sun, vice president of global business at Singapore-based Huobi Group. “As one of the most active crypto exchanges on the market, we see it as our responsibility to take a leading role in preventing the minority of bad actors from ruining it for the vast majority that follows the rules.”

Huobi emphasized that it seeks to work with regulators to comply with “know your customer” (KYC) and “anti-money laundering” (AML) rules in all of the markets in which it operates. 

That said, the company also promised that Star Atlas preserves the “high degree of financial privacy” that traders expect, calling anonymity “a core value of blockchain.” 

Searching for bad actors

Huobi said the analytics tool “automatically monitors every on-chain transaction for markers of high-risk activity.” Transactions are run through an address library with “tens of millions of tags and tens of thousands of blacklisted addresses,” to detect malicious accounts and dark web transactions. 

Star Atlas seeks out suspicious transactions using a variety of on-chain monitoring techniques, including “monitoring on-chain flow of assets, event correlation analysis, identity authentication, and malicious address labeling, to single out and track illicit activities,” said Huobi. “When combined with pertinent information like user identity, Star Atlas is able to enhance the overall capability in identifying abnormal behaviors in real time to effectively mitigate potential risks posed to Huobi or its users.”

Withdrawls from accounts flagged for suspicious activity will be temporarily frozen until additional verification has been provided. 

More than a year in the making, Star Atlas “encapsulates and maintains the most important core values at Huobi,” Sun added. “We have robust security on our platforms, we put safety first for our users, and our platform always makes our best efforts to provide a safe, secure trading experience for our users.”

Last month, Huobi announced a new policy of liquidating derivatives accounts slowly as margin calls approach to protect customers from rapid price changes. This came after the MakerDAO lending platform nearly had to be shut down after ether prices crashed during the coronavirus-induced Black Thursday market collapse. A circuit breaker like those used on major stock and commodities markets for flash crashes was also added. 

And, on March 30, Huobi introduced perpetual swaps futures contracts, calling them a way for cryptocurrency traders to profit from market volatility.