Earlier quoted context omitted.
I work at a distributed exchange and we have a blacklist. if funds are sent in from an address that's blacklisted we hold it and don't send them the other half. I don't know what the business does with those coins after that but there is a compliance team so I assume it's properly handled.
The mere fact a distributed exchange has a central compliance team tells me it isn't very distributed...
Sorry that should have been "non-custodial" not distributed.