Luno has confirmed that it will silently restrict the cryptocurrency withdrawal limits of clients based on their risk profile.
The cryptocurrency exchange and wallet provider has a set of published send limits on its website, but it also has a separate set of dynamic limits that are not disclosed.
It confirmed the existence of the dynamic limits when a MyBroadband reader found that they could not transfer cryptocurrency out of their Luno account.
The reader was trying to transfer ether to Binance, the largest centralised cryptocurrency exchange in the world by trading volume.
While trying to create the transaction, the Luno interface told the client that his daily transaction limit for ether was Ξ0.02 (R1,160) — far below the daily limit of $120,000 (R1.7 million) granted to Luno clients who have completed a FICA-like process.
When Luno blocked his transfer to Binance, the client tried to transfer his ether to a private Metamask wallet and hit the same limit.
After several queries to Luno support at the end of August, the client received a notification that his account had been restricted.
“Please note that Luno puts in place dynamic risk-based crypto send limits to protect our customers and in an effort to comply with best practices in anti-financial crime and anti-fraud,” the company stated.
“We would like to clarify that because the limits are dynamic in nature and are calculated based on our overall customer risk scoring, the limits may differ from customer to customer.”
Luno informed the client that these limits are temporary and will reset after a time.
“Unfortunately, Luno does not disclose how send limits are calculated on an individual level,” it said.
“We do this to ensure the integrity of our overall anti-financial crime measures.”
The Luno client whose account has been restricted told MyBroadband that he had not done any transactions on his account for at least a month.
He said that he bought and sold minimal quantities of crypto on the app between May and July.
“I’m a very light user, which is why I don’t understand the issue,” he said.
He said he is convinced there is a technical issue that has incorrectly flagged his account, and that it is impossible to get Luno to review it.
At the beginning of the new month, the client said his sending limit had been increased to $1,000 (R14,300) per day — less than 1% of Luno’s standard withdrawal limit.
MyBroadband asked Luno for advice on what clients can do to avoid running into these highly restrictive sending limits. The company said it could not provide specific details of behaviour to avoid.
“As part of the wider concept of a risk-based approach mentioned, for instance in the Financial Intelligence Centre Act (FICA), customer risk profiles are designed and scored based on a multitude of different data points,” said Marius Reitz, Luno GM for Africa.
“This data includes [know-your-customer] information, their lifetime with a financial institution, as well as the customer’s account activity — such as deposit and withdrawal activities.”
Reitz said that while customers could not influence their risk score, they can optimise their risk position by keeping their account information up to date, enabling safety features on their account, and generally keeping their account secure.
“Unfortunately, as stated in the response to the customer, the nature and calculations of individual customer risk profiles or customer groups cannot be disclosed,” Reitz stated.
“The reason is that Luno takes the utmost care to keep our financial crime measures as confidential as possible to ensure they remain effective.”
Reitz said that Luno did not implement these dynamic risk-based limits at the request of the financial surveillance department (FinSurv) within the South African Reserve Bank.
MyBroadband asked Reitz about FinSurv as South Africa’s central bank has cracked down on offshore cryptocurrency transactions in recent months.
This includes banning the purchase of cryptocurrency from international providers using a credit card.
The Reserve Bank has also declared that it deems it a violation of exchange control regulations—and therefore a criminal offence—to send cryptocurrency offshore from your local wallet or exchange.
Asked how these dynamic sending limits keep clients safe, Reitz told MyBroadband that in recent months Luno had seen a significant increase in customers losing funds by sending cryptocurrency to illicit actors, such as scammers.
“These transactions are characterised by high volumes/values of transactions being sent by customers, especially when related to the overall risk profile of a customer and their account,” he said.
“Dynamic cryptocurrency send limits protect customers from these large losses of funds.”
Reitz said they believe cryptocurrency send limits protect customers by creating a deterring environment for illicit actors to conduct cryptocurrency transactions.
“In short, we believe that risk-based limits act as a deterrent for illicit actors moving large amounts of funds within the crypto ecosystem,” he said.
Luno is one of many exchanges worldwide that uses dynamic cryptocurrency sending limits and restrictions to keep customers and their funds as safe as possible, said Reitz.