Bitcoin Forum

I have seen some threads online of members complaining that Binance put a hold on their accounts and asked for source of funds. In what cases does this happen and how to avoid it ?

Tainted coins. Coins linked to illegal activities. Coins linked to illegal drugs and the likes.

But one thing about life is that some of the coins can find its way to innocent people and the exchange do not care but will block the person not to withdraw or even block the person account and ask for source of fund.

Usually in cases where you make illegal transactions and deposit into Binane, the exchange will detect if it is suspicious, the balance will be frozen you will be asked for the source of funds from where if you want to recover.

In this case, it is rare that illegal actions will not pass through a centralized exchange because it will be quite complicated to detect.
To avoid it is enough from legitimate sources in the sense that it is not an illegal transaction.

There is no from a to z guidelines available in public so you'd have to take your chances.

But the general consensus is, if the coins are coming from a mixing/tumbling service and the exchange detects this, your account will be flagged.

Hefty deposits/volume I think has a higher chance of getting flagged too. I believe this has to do with risk gauging. It's the same idea as how by default/initially, we would need to give out more personal information to unlock higher limits. One could say, this could be coupled with other things as well since it's not always a single reason.

I think one of the reasons is;

- it has to do with the volume of incoming and outgoing transactions without any record of the user's activity in trading.

It's not that we are talking about thousands here but for an amount we can consider "huge", it might trigger the alarm. Honestly, I didn't see yet a user with that case, mentioned to the public if the reason for the account freeze was disclosed to them by Binance.

You avoid this to reducing usage of such centralized exchanges. There are a number of alternatives that won't ask for KYC or source of funds in case you are trying to make a trade or swap. It doesn't matter how careful or perfect you are, once you keep using a centralized exchange for your daily transactions. At one point, they will flag one of your transactions and ask for the source of funds, and you will be forced to obey their orders if you want your money back.

First, if there are transactions coming from a blacklisted address going to your account. But at this point, potato chips is right that there's no actual guidelines about it. They can ask anyone they think that has some suspicious activities or funds that came from those kind of activities that they want to halt the transaction. Typically, those that have larger transactions and withdrawals are likely to subject for this additional verification and there's really no clause about who are the qualified one but just expect that they might ask you one day without prior notice, so if you think your coins are clean then it's just a random verification.

I can only hope that Binance has a clear-cut policy on this. But I suspect there is none. The platform can freeze your fund or lock your account all of a sudden and without reason. When asked for an explanation, they can give as generic and shallow an answer as "we detect a suspicious activity in your account". Indeed, there are triggers. But even these aren't clearly pointed out one by one. It's not once, not twice, not thrice, but many times that accounts were frozen pending proofs of source of fund with the owner not knowing why.

Also remember that proofs can sometimes be very hard to provide. Binance could even go as far as ask you to prove that you indeed own the wallets from which all your deposits were made. Oftentimes, Binance and all these centralized exchanges just want to hostage your money.

Depends on who the operator is handling your case and their mood, lol. The fact is that Binance is also occasionally involved in cases of "money laundering scandals" which means that illicit money can escape the AML radar if you have insiders.

Users aren't free from risks with complex verification requests not only on Binance.

They have a risk indicator for each transaction that is managed by AI that checks the latest transactions to verify that they do not follow an address on a judicial blacklist, their own list or any legal updates requested from them.
Also, some security settings, such as depositing an amount larger than the average amount you deposit, for example, if you were trading up to $2000 and suddenly a deposit of half a million dollars and others occurred, all of these things increase the risk indicator and thus the possibility of being asked for more data.

This indicator may gives false results and you may be asked to provide your data.

It can be a huge concern just like what is happening with paypal. Paypal is taking the money of lot of users by putting hold on their accounts when they have become popular.

I have only seen posts from people who have used mixers or people who received funds that were associated with a mixer, such as those in the Sinbad campaign on Bitcointalk. Anything which they think is suspicious might cause your funds to be withheld until you can prove their origin. Their methods of detecting what they consider tainted funds aren’t entirely reliable so people often try to deposit funds from hacks and phishing scams directly to exchanges, hoping they can go unnoticed long enough to cash out in fiat.

You have to ask the Binance officials if you want to get a concrete answer. My best guess is as good as the rest of the forum members, tainted source of coins and unusual flux on transactions. Mostly illegal stuff that in case you dont deal with, you should be good to go. Usually such sites have systems to flag accounts on the basis of their algorithms to detect such.

To avoid this? Its unavoidable. If you are a law abiding citizen, you should rest easy. Once a site asks you for KYC, you have to go forward with it to save your money. But if you dont trust the exchange, why use them in the first place?

That's why using centralized exchange is a mistake in the first place. If you don't want to have a drama that related to froze funds and pending, stay away against CEX.

There are so many No KYC P2P and DEX you can choose e.g. Bisq, Agoradesk, Robosats etc you can check the other sites here https://kycnot.me/

Any centralized exchanges including Binance hates privacy, even you did nothing, you might be accused as a criminal.

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In addition, here is the proof.

I've also read enough about this but it has never been an issue for me because regulators are on the necks of exchanges as well so they have every right to know their customers more by asking for the source of their funds. Regardless of whether your funds look genuine or not, if it is big to an extent and they couldn't do the internal transfer verification to ascertain whether the funds have been small in value before they grew to that big level due to investment purposes, they might ask you to prove your source of finds.

This is an international practice to counter money laundry. Also, if your crypto address has been linked to bad transaction(s) initially, it is possible for them to ask for additional proof of that fund to exonerate yourself. As for me, I don't see this as a big deal, if your money is clean, just give them what they want and both parties will be good.

In fairness to PayPal, despite that there have been bad experiences that I've read about them, I've never got any problem with them. Honestly, I've made two accounts there because the first one was totally forgotten and it was more than a decade ago since I've logged back. After making the 2nd account there, they've asked me for some details not literally a KYC but connected my bank accounts and I'm good to go. I've seen concerns about them being blocked by PayPal but they're giving a period of time for them to return the money but they'll never be able to use the service again. Compared to the questioning of Binance about source of funds, they've never asked me that but it's been a while since I've used them again.

I read two cases so far. They ask for identity, verify the owner of the account, let the account to withdraw available fund and then disable the account's trading feature which means the account is not useful anymore and the user who verified the account can not use Binance anymore.

With a centralized exchange this is the price we pay.

Once you make a huge deposit into your exchange wallet account, they received a signal and start to make traces concerning the links you have with such amount of money and when they discover its something related to an illegal or fraudulent transaction, they raise an alarm over the transaction performed and subject the user account under KYC or hold the user account for more interrogations, the best to stay away from all these is to avoid using a centralized exchange because they operate under the policy that regulate for AML.

In any case at all, a centralized exchange can confiscate your funds at anytime for reasons you may never know existed or just based on guesswork from blockchain analysis companies. Take note that this problem is not only with binance, but with any custodial service, not your keys; not your coins, and if you use any custodial service, always be reminded that your funds can be seized anytime and you may be asked to prove the source of the funds.

It's not always the case, sending tainted coins from gambling or mixers will always get you to trouble, i'm talking to reputed exchanges with lots of users and volume. Talking about the "guess" of blockchain analysis as an excuse from new and unreputed exchanges will have a higher chance compared to reputed ones.

Not Binance, but BitGet has asked me to explain a mere transaction of $1000 just because -- it was a P2P transaction with another member, so nothing too suspicious. I had to write a small explanating and give them forum links about the deal.

Then when using their (BRL) fiat on-ramp/off-ramp, I had to send my tax fillings from the last year to prove that I had enough money to move what I was moving (?).

How do you determine which utxo is tainted, take note that there is nothing such as tainted BTC, and that term is simply used by custodial services to confiscate people's funds and attack BTC's fungibility. Anyone can use a gambling site or a privacy solution, and it does not mean they are involved in anything illicit.

My point here is that, it is better to understand that any exchange, it does not matter which it is, can confiscate funds deposited into it, for any reason at all.

Ask any chain analysis, it's just the same idea of dirty money/cash as we're talking about money where is nothing such "dirty cash" as all.

Of course, but whatever you say the point is funds from these platforms are considered as high risks and higher chance of getting confiscated in any CEX, not just for any reason but for this exact reason especially funds from privacy solutions. While unreputed and new exchanges probably will confiscate your funds almost for any reason, scam accusations board is the witnessed.