CCI Cryptocurrency Exchange Investigations 1 — Questions and Answers
Question 1: What does KYC stand for in the context of cryptocurrency exchanges?
- Know Your Customer (Correct answer)
- Keep Your Credentials
- Key Your Crypto
- Know Your Currency
Correct answer: Know Your Customer
KYC stands for Know Your Customer, the identity verification process exchanges must perform on users.
Question 2: Under FinCEN regulations, cryptocurrency exchanges operating in the US are classified as what type of business?
- Money Services Business (MSB) (Correct answer)
- Bank Holding Company
- Securities Dealer
- Insurance Provider
Correct answer: Money Services Business (MSB)
FinCEN classifies US cryptocurrency exchanges as Money Services Businesses (MSBs), requiring BSA registration and compliance.
Question 3: What is the 'travel rule' in cryptocurrency compliance?
- A rule requiring VASPs to share originator and beneficiary information for transactions above $3,000 (Correct answer)
- A regulation governing cross-border crypto shipments
- A law requiring miners to register travel
- A rule about moving crypto between personal wallets
Correct answer: A rule requiring VASPs to share originator and beneficiary information for transactions above $3,000
The travel rule requires VASPs to share originator and beneficiary information with counterpart institutions for transactions exceeding $3,000.
Question 4: What is the primary legal tool used to compel a cryptocurrency exchange to provide user account data?
- Subpoena (Correct answer)
- Arrest warrant
- Civil summons
- Administrative hold
Correct answer: Subpoena
A subpoena is the primary legal instrument used to compel cryptocurrency exchanges to disclose user account records and transaction history.
Question 5: What is a 'chain hop' technique used by criminals on exchanges?
- Rapidly converting funds through multiple cryptocurrencies to obscure the transaction trail (Correct answer)
- Moving funds between multiple bank accounts
- Switching between different blockchain networks only once
- Using VPNs to access geo-restricted exchanges
Correct answer: Rapidly converting funds through multiple cryptocurrencies to obscure the transaction trail
Chain hopping involves converting funds through multiple cryptocurrencies in rapid succession to break the tracing trail and complicate forensic analysis.
Question 6: What information in a cryptocurrency exchange's KYC records is most valuable to investigators?
- Government-issued ID, selfie photo, residential address, and linked bank accounts (Correct answer)
- Only the user's email address
- Trading strategy preferences and order history
- Device serial numbers only
Correct answer: Government-issued ID, selfie photo, residential address, and linked bank accounts
Exchange KYC records typically include government ID, photos, addresses, and linked financial accounts — all critical for identifying and locating suspects.
CCI Cryptocurrency Exchange Investigations 1
What does KYC stand for in the context of cryptocurrency exchanges?