Rules differ by jurisdiction. The EU TFR requires ownership verification for self-hosted address transfers above EUR 1,000, Hong Kong requires originator and beneficiary details before sending to one, and Japan requires collecting owner information. Many legitimate users hold funds this way, so the wallet type alone is not a red flag.
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Glossary term
What is Unhosted wallet?
An unhosted wallet, also called a self-hosted or non-custodial wallet, is a crypto wallet whose private keys are held by the user rather than by an exchange or other regulated service provider. Because no intermediary performs customer checks on it, transfers to or from unhosted wallets are a common trigger for extra due diligence.