What is AML (anti-money laundering)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
AML covers the whole apparatus for stopping criminals from disguising where their money came from. Crypto exchanges are expected to verify customers, monitor transactions and report suspicious activity. For users it is the usual reason a withdrawal stalls, but it is also the price of being treated as part of the financial system.
Key points
- The full set of measures against disguising criminal funds
- Built on verification, ongoing monitoring and suspicious-activity reports
- Exchanges may hold a deposit or withdrawal while they review it
- Usually discussed together with counter-terrorist-financing rules
Definition
The collective term for the laws, controls and procedures designed to prevent money laundering. In Japan these obligations fall on financial and crypto businesses under anti-crime-proceeds legislation.
Money laundering means moving and converting criminal proceeds repeatedly until their origin is unclear. Crypto can cross borders in minutes, so it has long been seen as exposed to this, and exchanges are held to standards close to those of banks.
In practice, verification at sign-up is followed by continuous monitoring. Large sums moving in and out over a short period, repeated transfers with an unexplained counterparty, or contact with addresses tied to sanctions can all trigger a hold and, where required, a report to the authorities.
What users usually experience is a withdrawal placed on hold with questions about the source of funds and the purpose of the transfer. That is the provider meeting its own obligations rather than an accusation. Explaining the history plainly, with purchase records to hand, is the fastest route through it.
Watch out for
- · Being asked to receive a transfer on someone's behalf is a classic way to be drawn into laundering
- · Accepting funds you cannot account for can end in a frozen or closed account
- · The exact detection thresholds differ by provider and are mostly not published