Many Bitcoin enterprises try to be AML/KYC compliant in the hope that if they come to the attention of authorities they won't get prosecuted for money laundering in addition to being fined for operating their service without the appropriate licences.
Lets arrange the things said in this sentence in a different order
>> in addition to being fined for operating their service without the appropriate licences.
Bitstamp is likely operating without appropriate licenses.
>> in the hope that if they come to the attention of authorities they won't get prosecuted
Bistamp is likely trying their best not to come to the attention of authorities in any way, shape or form because it they ever do, they will probably be shut down at the spot for operating without license.
>> try to be AML/KYC compliant
They cannot even try to be AML/KYC compliant without contacting the authorities.
>> Annoying as it might be to feel like your transactions are being unfairly scrutinised, it's preferable to going to withdraw your funds only to find that the domain has been seized by authorities and all funds frozen
I would think everyone would like to get their withdrawal processed right NOW instead of waiting for weeks or months for it during which time the exchange could be seized by authorities or go bankrupt or both.
>>None of these services are going to stay in business for any length of time without being AML/KYC compliant
None of these services are going to stay in business for any length of time without having appropriate licenses.
>>And why the very small amount of 9 thousand dollar from an already identified customer would give any red flags regarding illegal activity KYC is aimed at? BIG LOL.
The checking or origin of funds is supposed to take place during DEPOSITING of the funds. Not at withdrawing. When I have deposited cash slightly above 10kEUR into banks they have asked me about the source of the funds. That is okay. That is also the moment when the banks can easily decline the deposit for any reason whatsoever. I have numerous times withdrawn money from banks in the range of 100k-200kEUR and never been asked about anything. I do not think banks are allowed to confiscate any money without having the authorities intimately involved in the process and when authorities are involved in an inquiry about a customer the banks are not allowed to tip the customer about this ongoing inquiry by authorities in any manner including declining the withdrawal.
Lets imagine a situation if some authority comes to an exchange to bust them for operating without appropriate licenses either before or after they have gone bankrupt. Which additional things are going to give the exchange most additional grief:
A) If the illegal exchange has determined that some customers are laundering drug money and the exchange has not promptly informed the authorities with full disclosure about their operation as an illegal exchange and the customer relation they have but instead have stolen the money by themselves which they without any court order have by themselves declared as probable drug money and they are keeping the possession of that money themselves.
B) The exchange has performed normal KYC paperwork at account opening time and performed additional checks at money depositing time but have not done any extra checking when customer wants to close an account nor stolen customer funds when they want to withdraw.
My bet is that the option A is about the most incriminating thing the exchange can do in this particular situation and bring them the most grief with law, much more than the option B which brings nothing extra in addition to the basic problem of operating without appropriate licenses.
Actually I think there is an option C which also looks very bad for the illegal exchange:
C) The exchange has taken specific interest in some customer but has not contacted authorities but instead some backcountry adhock bullshit procedure they have resumed business and later this person turns up to be a drug-baron.
This option C looks much worse to the illegal exchange than option B of not noticing anything suspicious in the first place.
If anyone of your customers turns up to be a drug-baron the first thought for a possible defense is to deny any knowledge of anything. You do not want to do things that decline yourself the option of using this kind of defense. And if you know you have drug-barons as customers and you are unable to contact authorities you want the drug-baron go away, shutdown their account and withdraw all money and be gone. That is the way of least consequences to the business.
