Money laundering in the crypto space is the process of using digital currencies to conceal the proceeds of illegal activities as legitimate funds. This is typically achieved by means of converting “dirty” money into crypto, and using various methods, such as multiple transfers, to make it difficult to trace the origin of the funds.
Anti-money laundering techniques are used to address this issue – read on to find out more about them!
What Is Anti-Money Laundering?
Anti-money laundering (AML) in crypto refers to the measures taken by crypto businesses and regulatory authorities to prevent the illicit use of digital currencies for illegal purposes. This includes the identification of suspicious activities, reporting to relevant entities, and implementing advanced security protocols.
What You Need To Know About Anti-Money Laundering
As follows from the anti-money laundering definition, AML measures are crucial for maintaining the integrity and reputation of the crypto industry, especially since it’s at significant risk of criminal activity due to:
- A high degree of anonymity
- Simplified cross-border transactions
- A lack of centralized oversight
The Financial Action Task Force (FATF) sets worldwide standards for anti-money laundering regulations. In response to the growing use of crypto, the FATF released its industry-specific AML guidelines in 2014.
- Customer Due Diligence (CDD). Crypto organizations must perform customer due diligence, which means verifying the identity of their customers and assessing the risk of money laundering and other financial crimes.
- Record keeping. Crypto exchanges must keep records of all transactions for a specified period of time to assist with anti-money laundering investigations, if necessary.
- Reporting. Crypto businesses must report suspicious activities to relevant authorities and provide information about the parties involved in the transaction.
- Transaction monitoring. Crypto platforms must implement systems to monitor their transactions and detect fraudulent activities.
- Cooperation with law enforcement. Crypto businesses must cooperate with law enforcement and other relevant authorities in their efforts to prevent money laundering and other financial crimes.
These anti-money laundering recommendations were rapidly implemented by member jurisdictions, including the US Financial Crimes Enforcement Network (FinCEN), the EU Commission, and many other regulatory bodies.
