Key Takeaways
- Illicit crypto users are increasingly turning to AI to bypass KYC (know-your-customer) requirements.
- Preventing abuse requires increasingly sophisticated liveness detection.
- Crypto exchanges like MEXC are investing in new tools and training to tackle the problem.
As crypto exchanges have ramped up their anti-money laundering (AML) and sanctions enforcement efforts, illicit users are increasingly using AI deepfakes to bypass strict KYC (know-your-customer) requirements.
For example, MEXC observed 3,097 “fraudulent liveness” cases in July–August alone, representing a 15% rise, the exchange disclosed in a document shared with CCN.
Deepfakes vs. Liveness Detection
In the smartphone age, most KYC systems require users to upload photos of themselves and their identity documents to verify that they are who they say they are.
But with AI now able to generate images of human faces and documents that could fool even a trained eye, photo-based KYC is no longer enough. In the era of AI-generated images, so-called “liveness detection” has become integral to many modern KYC systems.
Liveness detection verifies that a biometric sample (typically a selfie or face scan) comes from a live human being present at the moment of capture.
Active liveness checks ask the user to blink, smile, turn their head, or follow on-screen prompts. Passive liveness checks detect subtle signs of real human presence without requiring user interaction.
For crypto exchanges, online banking apps, and other digital services that require a high degree of security and AML compliance, liveness detection has become a crucial defence against the use of deepfakes to spoof KYC systems.
Crypto Exchanges Face Deepfake Challenges
With platforms and KYC-hackers engaged in a technological arms race, crypto exchanges have stepped up their efforts to tackle deepfake fraud and AI spoofing.
In MEXC’s case, the firm has conducted joint training programs with law enforcement, where its global compliance teams learn the latest techniques to detect and block illicit activity.
“As technology continues to advance, fraudulent liveness attempts leveraging tools such as deepfake technology have become a growing concern,” the exchange said.
“By investing in training and upgrading its monitoring and detection frameworks for AML, illicit activities, and KYC, MEXC continues to align with international regulatory standards while protecting its global user base from criminal exploitation,” the document added.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
