Luno, one of the biggest cryptocurrency exchanges in South Africa, has confirmed that it has begun restricting withdrawal requests from being submitted by clients. According to the exchange, the limits are aimed at deterring illicit actors from moving large amounts of money into the crypto ecosystem. However, despite acknowledging this fact, the exchange has refused to explain more about the ‘dynamic risk-based limits’ that have been imposed. As per a report, the limits are separate from the sending limits you can see on the exchange’s website and one of the exchange’s clients had discovered them first.
The client came to know of the limit when they tried to transfer the crypto in their Luno account to their Binance wallet and failed to do so. When they approached Luno for answers, the exchange explained that the limits were imposed for protecting their clients and for complying with best practices in anti-fraud and anti-financial crime. In addition, the exchange also informed the client that the limits were dynamic in nature and would be calculated based on the overall risk scoring of the customer, which means that the limits would be different for every client.
However, the affected client was informed by Luno that the exchange did not disclose how they were calculating the send limits individually. The general manager for Luno Africa, Marius Reitz explained how and why a risk-based approach is being used by the exchange for determining the limits of every client. He said that the risk profile of the customers was scored and designed based on a number of different data points. Reitz added that while customers cannot do anything to influence the risk score, it is possible for them to optimize their risk position. They have to keep their account information updated, keep their account secure generally and also enable the safety features on their account.
Reitz was also asked about speculations relating to the exchange after they had imposed these limits. It was speculated that Luno had decided to impose these send limits because it had been requested to do so by the financial surveillance department (Finsurv). However, Reitz denied any such rumor. As a matter of fact, the general manager asserted that the exchange had decided to do so because they want to keep their measures relating to financial crimes as confidential as possible in order to ensure they remain effective. After all, if cyber criminals were familiar with the tactics being used by exchanges for safety purposes, they would certainly make all possible efforts to undermine them.
Nonetheless, the exchange’s decision to not inform the customers beforehand regarding the limits and not mentioning the exact approach being used to calculate the dynamic limits is worrisome for many. Customers of the exchange are not going to appreciate the fact that they are not permitted to withdraw their money funds and have to deal with limits that are calculated based on unknown factors. This means they will have no idea what they can do to improve the limits.