AML
Anti-Money Laundering—regulations and procedures that financial institutions, including crypto exchanges, must follow to prevent the use of financial systems for money laundering and terrorist financing.
Last updated: January 5, 2025
What is AML?
AML (Anti-Money Laundering) refers to laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. In crypto, AML compliance requires exchanges to monitor transactions and report suspicious activity.
How AML Works in Crypto
Exchange Requirements
- Verify customer identities (KYC)
- Monitor transaction patterns
- Screen against sanctions lists
- Report suspicious activities (SARs)
- Maintain transaction records
Transaction Monitoring
Exchanges flag transactions that appear:
- Unusually large or frequent
- Structured to avoid reporting thresholds
- Connected to known illicit addresses
- Inconsistent with user profile
AML vs KYC
While related, they serve different purposes:
| Aspect | KYC | AML |
|---|---|---|
| Purpose | Identity verification | Prevent money laundering |
| Timing | Account opening | Ongoing |
| Focus | Who you are | What you do |
| Requirements | ID, address, photo | Transaction monitoring |
KYC is a component of AML—you can’t monitor suspicious activity without knowing who’s transacting.
Global AML Frameworks
FATF (Financial Action Task Force)
- Sets international AML standards
- “Travel Rule” requires sharing transaction party info
- Recommendations adopted by most countries
Regional Regulations
- US: Bank Secrecy Act, FinCEN requirements
- EU: AMLD5, AMLD6 directives
- UK: Money Laundering Regulations
AML Impact on Users
What You’ll Experience
- Identity verification requirements
- Source of funds questions for large deposits
- Occasional withdrawal delays for review
- Transaction limits until verified
Potential Account Actions
- Temporary holds on suspicious transactions
- Enhanced due diligence requests
- Account restrictions or closures
Exchange AML Compliance
Major exchanges invest heavily in AML:
- Coinbase: Strict US regulatory compliance
- Kraken: Strong compliance program
- Binance: Global compliance team
What Triggers AML Review
- Large deposits without clear source
- Rapid movement of funds in/out
- Connections to flagged addresses
- Inconsistent trading patterns
- Transactions to/from high-risk jurisdictions
Best Practices for Users
- Complete full KYC verification upfront
- Be prepared to explain source of funds
- Keep records of crypto purchases/transfers
- Avoid structuring transactions to evade limits
- Use regulated exchanges for large transactions
Ready to Start Trading?
Now that you understand aml, explore the best exchanges to begin your crypto journey.