In the last few years, cryptocurrencies have made a leap to institutional adoption, with numerous tech and financial companies tapping into this innovative sector. Despite enormous opportunities and products crypto may offer to the world, there are also significant issues that require attention. The fact is that insufficient crypto AML compliance in crypto companies made this sector an ideal place for illegal financial schemes and money laundering. What is an AML check? Let’s discuss it in the context of a crypto exchange.
Troubles Caused by The Lack of Crypto Compliance
With the growth of the number of crypto exchanges, the volume of laundered funds has grown as well. According to Chainalysis research, in 2021 alone the total amount of money laundered reached $8.6 billion. Gaps in crypto AML check policy or the total absence of AML compliance in many trading platforms have created opportunities for financial criminals to use digital assets for money laundering, financing terrorists, and fraud.
It’s not a secret that Iran managed to bypass sanctions via crypto; Hamas terrorists were sponsored via a Russian crypto exchange; numerous financial criminals obfuscate their financial transactions, transferring crypto to multiple wallets and exchanges, etc.
In response, governments worldwide impose stricter regulations that detect and stop criminals, not allowing them to withdraw illegally obtained funds into fiat. One of the main measures is AML for crypto exchanges.
Cryptocurrency AML Compliance for Exchanges
AML compliance in crypto exchanges refers to the implementation of measures and procedures to prevent and detect activities related to money laundering. This includes:
- verification of the identity of users;
- monitoring transactions for suspicious behavior;
- adhering to regulatory requirements aimed at combating money laundering and other illegal actions.
The goal is to ensure a secure and transparent environment within the cryptocurrency exchange while complying with AML cryptocurrency regulations.
Every state develops and implements AML regulations at different levels – some jurisdictions provide rules for the whole crypto sector, and others impose restrictions for specific activities. Due to the evolving nature of digital assets, this sector requires regular updates in the regulatory system.
To comply with crypto AML compliance, a crypto business should:
- Conduct risk assessments to detect risks related to money laundering.
- Employ AML screening procedures.
- Keep track of the latest regulatory developments.
- Hire compliance specialists with a background in regulatory and FinTech.
- Trace and adopt regulations in specific jurisdictions.
- Use the latest technologies, such as AI-supported compliance tools.
Conclusion
The dynamic development of the crypto industry and its shift to institutional adoption raised concerns about regulations related to anti-money laundering and financing of terrorists. Compliance with AML rules will help reduce the risks of money laundering and detect and stop those organizations attempting to violate regulations.
