What Is Anti-Money Laundering? Anti-money laundering (AML) refers to a set of laws and regulations enacted to prevent the illegal movement of money worldwide. Money laundering refers to the process of concealing the origins of (illegally obtained) cash by passing it through a usually complex sequence of transfers or transactions. These transactions are generally legitimate and, hence, would not be flagged, thus allowing the original owner of the illegitimate funds to use them for lawful purposes. AML targets criminal activities like trading in illegal goods (drugs, contraband, etc.), public office corruption and tax evasion, to name a few. It deals explicitly with methods concealing these crimes and the money obtained from these acts. Financial institutions play a significant role in AML. If criminals cannot successfully move the proceeds of these illegal acts, they would not be incentivized to perform these crimes. Therefore, financial institutions are required to monitor customers’ transactions and deposit records, especially when they appear to be larger than ordinary. Why Is Crypto AML Important? Crypto AML is important because it helps to detect, prevent and report suspicious activities related to the use of digital currencies. It helps to prevent criminals from using digital currencies to fund illegal activities, such as drug trafficking and terrorism. Establishing a set of compliance standards also helps to protect digital currency users and businesses from being exploited by criminals. Are AML Rules Enforced in Crypto? Yes, AML rules are enforced in crypto. Major exchanges and other crypto businesses must comply with AML regulations and take appropriate steps to combat fraud and money laundering. This includes implementing KYC (Know Your Customer) procedures, monitoring customer activity and transactions, and filing suspicious activity reports. Who Regulates Crypto AML? Cryptocurrency AML is regulated primarily by Financial Action Task Force (FATF). FATF is an intergovernmental organization created to combat money laundering and terrorist financing. Other countries and regions may have their own specific AML regulations for cryptocurrency.
February 12, 2023
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