Course Content
What Is Anti-Money Laundering (AML)?
AML regulations attempt to stop the illegal laundering of illicit funds. Individual governments and multinational organizations like the FATF legislate against money laundering activities. Money laundering takes “dirty” money and turns it into clean money. This can be done by disguising the origins of the funds, mixing them with legitimate transactions, or investing them into legal assets. Crypto is an attractive way to launder money due to its privacy, difficulty in retrieving funds, and underdeveloped legislation. Large-scale seizures of crypto show criminals regularly use it to launder huge sums. Binance and many other crypto exchanges track suspicious behavior as part of their AML compliance and report it to law enforcement.
What Is Anti-Money Laundering (AML)?
About Lesson
AML consists of regulations and laws that deter the movement and washing of illegal funds. AML is closely associated with the Financial Action Task Force (FATF) set up in 1989 to encourage international cooperation. For example, AML measures target terrorist financing, tax fraud, and international smuggling. AML differs by country, but there is a global effort to align on standards.
As technology has progressed, so have methods for money laundering. As a result, AML software typically flags behavior that may be seen as suspicious. These flags and measures include large transfers of money, repeated inflows of funds into an account, and cross-checks against users on watchlists. AML doesn’t just apply to cryptocurrencies. Any asset or fiat currency can be monitored and held to AML regulations.
It’s taken some time for regulation to catch up with cryptocurrencies. As blockchain technology is constantly innovating, AML procedures change regularly along with compliance measures. However, this isn’t always seen as positive. Many cryptocurrency enthusiasts value the asset’s anonymity and decentralization. For this reason, increased regulation and documentation of users’ identities are sometimes seen as contrary to crypto’s ethos.