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What Is Anti-Money Laundering?
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2025-07-21 | 20m
Money laundering is a financial crime conducted by criminal-minded individuals and organizations. Money laundering is a criminal act that involves taking illegally obtained proceeds or funds and disguising the source of these funds to make it seem like they are legitimate proceeds. Recently, money laundering activities have been on the rise, and they are explicitly using cryptocurrency by converting these illegal proceeds into cryptocurrency. The Anti-money laundering (AML) regulation is being deployed in all facets with complete enthusiasm to curtail these activities.
Anti Money laundering (AML) involves the operations and activities conducted by financial institutions to ensure compliance with the requirement and monitor suspicious economic activities. According to Chain Analysis, over $23 billion worth of cryptocurrencies and up to $2 trillion in fiats have been laundered between 2017 and 2021. That is about 5% of the global GDP. With such a figure and continuous increase, it is expedient to tighten the laws and regulations towards apprehending financial criminals and bringing money-related crimes to the barest minimum.
What Is Anti-Money Laundering (AML)?
Anti-money laundering refers to the various laws, regulations, rules, and procedures geared towards uncovering efforts to disguise illegal funds as proceeds from legitimate ventures. Anti-money laundering (AML) legislation became necessary to checkmate the growth of international financial activities, the growing ease of conducting multiple chains of transactions, and the ease of crypto transactions.
Since money laundering seeks to conceal financial crimes such as tax evasion, drug trafficking, proceeds of public corruption, and terrorism/ civil unrest financing, it is expedient to have regulations and laws to prevent these illicit acts and punish the actors. The rules and regulations are the Anti-money laundering legislation, and Anti-money laundering puts strict measures to make it difficult to conceal profits from crime. Those who engage in money laundering continue to devise various ways to disguise illicit funds and make them seem legal. They go as far as registering businesses, lobbying financial institutions, and several other methods to conceal the criminal nature of such funds.
AML legislation is a joint effort between financial institutions, government agencies, corporate bodies, and law enforcement bodies to develop due diligence plans and put tangible measures to detect suspicious transactions or assess the risk of money laundering-related acts. For instance, the United States Anti-Money Laundering regulation that has been in use since 1970 requires banks to report cash deposits exceeding $10,000. The AML regulation is now advanced to a complex regulatory framework that requires banks to do due diligence and fish out suspicious transactions. The process is called “Know Your Customer (KYC).
History of AML
The Bank Secrecy Act (BSA), established in the United States in 1970, was a pioneering piece of legislation in the fight against money laundering. It has been continually updated and strengthened, with the Financial Crimes Enforcement Network (FinCEN)currently in charge of its administration.
In 1989, the Global Financial Action Task Force (FATF) was formed by a group of governments and organizations. Its mission was to develop and promote international standards for preventing money laundering. After the 9/11 attacks, the FATF expanded its focus to include anti-money laundering (AML) and terrorism financing.
The International Monetary Fund (IMF), with its 189 member countries, also plays a crucial role in maintaining the stability of the global monetary system. It is particularly concerned about the impact of money laundering and similar crimes on the integrity and stability of the financial sector and the broader economy.
In 1990, the European Union introduced its first anti-money laundering Directive. This directive, which is regularly updated, aims to prevent the misuse of the financial system for money laundering.
In the UK, anti-money laundering laws are enforced under the Proceeds of Crime Act 2002 (POCA). Several organizations, including the NCA, SFO, FCA, and HMT, work together to prevent financial crime. Despite leaving the EU, the UK's laws and regulations still align with the FATF recommendations and the EU's Anti-Money Laundering acts.
The Office of Foreign Assets Control (OFAC) in the USA develops programs to safeguard U.S. foreign policy and national interests. Many other countries have regulatory bodies that adhere to FATF regulations.
List of Global AML Regulations and Regulatory Authorities by Country
| Country | Regulator(s) | Regulation(s) |
| United States | FinCEN | Bank Secrecy Act (BSA), USA PATRIOT Act |
| United Kingdom | FCA, HMRC, National Crime Agency (NCA) | Money Laundering Regulations 2017 (amended), Proceeds of Crime Act (POCA) |
| Canada | FINTRAC | Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) |
| Singapore | Monetary Authority of Singapore (MAS) | MAS Notice 626, AML/CFT Guidelines |
| Australia | AUSTRAC | Anti-Money Laundering and Counter-Terrorism Financing Act 2006 |
| India | FIU-IND, RBI, SEBI, IRDAI | Prevention of Money Laundering Act (PMLA), RBI AML Guidelines, SEBI, IRDAI |
| UAE | CBUAE, Financial Intelligence Unit (FIU) | Federal Decree Law No. 20 of 2018 |
| Germany | BaFin | German Money Laundering Act (GwG), EU 6AMLD |
| France | ACPR, TRACFIN | French Monetary and Financial Code, EU 6AMLD |
| Netherlands | De Nederlandsche Bank (DNB), FIU-NL | Wwft (Dutch AML Act), EU 6AMLD |
| Hong Kong | HKMA, SFC, C&ED | Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) |
| Japan | JFSA, National Police Agency (NPA) | Act on Prevention of Transfer of Criminal Proceeds |
| Switzerland | FINMA | Anti-Money Laundering Act (AMLA) |
| South Africa | Financial Intelligence Centre (FIC) | Financial Intelligence Centre Act (FICA) |
| Brazil | COAF (Council for Financial Activities Control), Banco Central | Law No. 9,613/1998 |
| Mexico | CNBV | Federal Law for the Prevention and Identification of Operations with Illicit Resources |
| Saudi Arabia | Saudi Arabia Financial Intelligence Unit (SAFIU), Saudi Central Bank (SAMA) | Anti-Money Laundering Law (2017, updated) |
| Türkiye | MASAK | Law No. 5549 on Prevention of Laundering Proceeds of Crime |
How Does Anti-Money Laundering Compliance Work?
AML compliance works through organized, risk-based programs that are adjusted to the institution's size, services, and level of exposure. These programs are based on four key components: due diligence, monitoring, reporting, and internal control.
Customer Due Diligence (CDD)
CDD is the pillar of every successful AML program. It is the policy requirement that calls for the affirmation of clients' identity and understanding the nature of business relationships. It involves collecting government IDs, address proof, and identification of beneficial owners, where it is about legal persons. Organizations have to assign risk profiles to each client and make the necessary revisions on a regular basis. According to the AML experts, ongoing CDD not only meets the requirements of the law but also serves as a step against strategic financial abuse.
Transaction Monitoring
After the clients are onboarded, their financial behavior must be closely monitored. Advanced systems track account activity and measure it against known patterns of behavior. They flag up anomalies—big-speed fund transfers between jurisdictions, massive cash deposits, or out-of-profile transactions. Next-generation transaction monitoring systems are leveraging artificial intelligence and machine learning to reduce false positives and improve accuracy. We believe that such implementation of smart automation here represents a paradigm shift in how banks approach detecting financial crime.
Suspicious Activity Reporting (SAR)
When suspicious systems detect a possible illegal transaction, the institution must file a Suspicious Activity Report with the concerned authority. SARs play a crucial role in criminal investigations since they provide regulators and law enforcement agents with valuable tips. In order to meet regulatory requirements, these reports have to be accurate, detailed, and submitted within specific time frames. Failing to do so can attract legal and financial implications.
Risk Assessment and Internal Controls
All institutions must regularly review their risk exposure to financial crime. It entails the study of customer categories, product portfolios, geographic risk, and transactional patterns. Through these, firms must implement policies and controls that will manage those risks. Internal controls also include training of staff, enhanced high-risk customer due diligence, audit trails, and secure data handling. These, in my opinion, are what put AML into practice from theory.
Why Is Anti-Money Laundering Important?
There are two primary reasons underscoring the importance of AML policies. The first is the reduction of money-related crimes. AML regulations have made significant progress in combating these offenses, leading to a decline in illegal activities and increased efforts to apprehend those involved.
Furthermore, enforcement against criminals has improved notably over the past decade. Penalties for money laundering vary depending on the jurisdiction, but individuals convicted of such crimes are generally subject to stringent sanctions. Recently, money launderers are facing greater scrutiny and consequences than ever before.
However, it is important to note that anti-money laundering laws and enforcement levels differ across countries and government agencies. Some nations have less rigorous penalties and may opt for fines, which can incentivize criminals to relocate activities to countries with less stringent regulations.
Additionally, AML initiatives are resource-intensive. From monitoring suspicious transactions to investigating and apprehending offenders, these activities require substantial processes, expertise, and funding.
Anti-Money Laundering and Cryptocurrency
The emergence of cryptocurrencies has introduced new aspects to AML. The decentralized nature of cryptocurrencies may present challenges in tracking and controlling transactions, which could potentially be exploited for illicit activities. As a result, regulators worldwide are striving to adapt existing AML regulations to the considerations presented by cryptocurrencies. This includes efforts to develop methods for identifying and tracking cryptocurrency transactions and collaborating with various entities in the cryptocurrency space to uphold AML regulations.
One of the core requirements is the know-your-customer (KYC) process, which obligates companies to verify the identity of their clients and retain records of transactions. This facilitates the detection and reporting of suspicious activities.
Additionally, organizations are required to implement transaction monitoring systems. These systems involve reviewing customer transactions to identify any unusual or potentially illicit activity. For example, transactions involving large sums of money or originating from high-risk jurisdictions may need to be flagged for further investigation.
It is important to note that blockchain technology inherently enhances traceability, as transactions are recorded publicly and can often be traced back to the originating address. While many believe that cryptocurrency transactions offer complete anonymity, they are technically pseudonymous. This means that, with sufficient effort, transactions can often be linked to specific entities. Furthermore, evidence suggests that a small percentage—less than 0.5%—of Bitcoin transactions are involved in illicit activities, and a significant portion of money laundering and fraud originate from entities regulated within traditional financial systems.
CoinCatch AML/KYC Policies and Procedures
CoinCatch is committed to supporting AML/KYC operations. In principle, we are dedicated to:
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Conducting due diligence when dealing with our customers and any individuals acting on their behalf;
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Developing our business in accordance with high ethical standards and preventing, to the greatest extent possible, the establishment of any business relationships associated with or facilitating money laundering or terrorist financing;
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Cooperating with and assisting relevant legal authorities to the fullest extent possible in preventing the threats of money laundering and terrorist financing.
Conclusion
The anti-money laundering regulation became necessary to check the rising number of money laundering cases spread across the globe.
Financial institutions, legal businesses, and corporate bodies now engage in money laundering, making it difficult for law enforcement agencies to detect and track the trustworthy source of these illicit funds.
Aside from the Customer Due Diligence (CDD) and Know Your Client (KYC) measures, tools and software are in place to ease tracking and detecting money laundering. Industry players are therefore optimistic that this illicit activity will reduce and the perpetrators will face the full wrath of the law.
Reference:
Notabene. (n.d.).
Crypto Travel Rule 101: What you need to know about AML compliance. Retrieved July 21, 2025, from
https://notabene.id/crypto-travel-rule-101/aml-crypto
Hayes, A. (2024, July 15).
Anti-money laundering (AML): What it is, its history, and how it works. Investopedia.
https://www.investopedia.com/terms/a/aml.asp#toc-anti-money-laundering-in-the-us
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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