Coinbase Wins Patent for AI-Based Crypto Compliance System
- The system relies on an array of data points to detect risk, including users’ ages, balances, transactions volume and location.
A patent by US crypto exchange and wallet provider Coinbase proposes a new scoring mechanism for strengthening compliance, Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term, and fraud prevention through flagging non-compliant accounts. This is according to a filing published by the US Patent and Trademark Office (USPTO) on November 19.
Details about the newly published patent on the USPTO website indicate how Coinbase can build an alerts system that includes different severity levels based on their self-calculated score for each specific vulnerability and risk factors.
The proposed module relies on an array of data points to detect risk. It enters factors from user accounts into the system, then assigns a compliance score for each account based on the respective factors.
These factors include users’ ages, balances, volume of transactions, geographical location, number of devices used to access the respective account, and previous compliance reviews. It also takes into account if and how the user has verified his identity, how many changes have been made to personal details, among other 20 factors.
The next step, explains the filing, is to compare such compliance figures with a reference score to highlight those who fail to tick all boxes. The system also incorporates a freeze logic, where a security measure with which it can suspend the flagged account, halting all transactions in an adverse situation.
“A corrective action system allows for determining, for each one of the accounts that is flagged as non-compliant, whether the account is bad or good, entering the determination into a feedback system and closing the account,” it further explains.
Using artificial intelligence to drive compliance
Highlighting the possible flaws in the proposed systems, Coinbase’s solution uses AI and machine learning to help increase the efficiency of compliance tools across a variety of operations.
Since compliance alert systems based on standard technologies are triggering false positives every day, Coinbase’s module filters dozens of data elements and false alarms to improve its outcomes.
The cross-border and stateless nature of Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term throws up different challenges to regulators, even if they decide to devise formal guidelines to govern the asset class. As such, digital assets operators, including crypto exchanges, are increasingly turning to compliance solutions to help provide background checks on their customers as they find themselves under increasing scrutiny from regulators over possible violations of securities and AML rules.
A patent by US crypto exchange and wallet provider Coinbase proposes a new scoring mechanism for strengthening compliance, Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term, and fraud prevention through flagging non-compliant accounts. This is according to a filing published by the US Patent and Trademark Office (USPTO) on November 19.
Details about the newly published patent on the USPTO website indicate how Coinbase can build an alerts system that includes different severity levels based on their self-calculated score for each specific vulnerability and risk factors.
The proposed module relies on an array of data points to detect risk. It enters factors from user accounts into the system, then assigns a compliance score for each account based on the respective factors.
These factors include users’ ages, balances, volume of transactions, geographical location, number of devices used to access the respective account, and previous compliance reviews. It also takes into account if and how the user has verified his identity, how many changes have been made to personal details, among other 20 factors.
The next step, explains the filing, is to compare such compliance figures with a reference score to highlight those who fail to tick all boxes. The system also incorporates a freeze logic, where a security measure with which it can suspend the flagged account, halting all transactions in an adverse situation.
“A corrective action system allows for determining, for each one of the accounts that is flagged as non-compliant, whether the account is bad or good, entering the determination into a feedback system and closing the account,” it further explains.
Using artificial intelligence to drive compliance
Highlighting the possible flaws in the proposed systems, Coinbase’s solution uses AI and machine learning to help increase the efficiency of compliance tools across a variety of operations.
Since compliance alert systems based on standard technologies are triggering false positives every day, Coinbase’s module filters dozens of data elements and false alarms to improve its outcomes.
The cross-border and stateless nature of Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term throws up different challenges to regulators, even if they decide to devise formal guidelines to govern the asset class. As such, digital assets operators, including crypto exchanges, are increasingly turning to compliance solutions to help provide background checks on their customers as they find themselves under increasing scrutiny from regulators over possible violations of securities and AML rules.