Anti-Money Laundering in Crypto

The Importance of Anti-Money Laundering in Crypto

The number of cryptocurrencies and digital assets has grown significantly since the launch of Bitcoin in 2008. While Bitcoin remains the most well-known and largest by market cap, thousands of other digital currencies, stablecoins like USDT, and security tokens have been introduced.

With the growth of crypto adoption, cases of their misuse become quite often. According to the Chainalysis report, in 2022, crypto values received by illegal addresses reached their maximum level of $20.6 billion (compared with $18.1 billion in 2021). The main contributors to illicit profits were sanctioned entities, fraudulent schemes, and stolen funds.

To combat money laundering and fraud schemes, clear and strict regulations should be implemented in the crypto sector. Who and how regulates the crypto sector? What is AML checks? Let’s talk about it in this article. 

How is Crypto Regulated?

Around the world, governments are issuing rules for cryptocurrencies. Out of 20 countries studied by the Atlantic Council, including the United States, Canada, the UK, Germany, Singapore, etc., only 14 have regulations for preventing money laundering (AML crypto) and countering the financing of terrorism that apply to digital assets. The rules can’t catch up with the fast adoption of digital assets, and the different regulations in various places make it challenging for global institutions to comply with them seamlessly. It creates a gap that fraudsters use for illegal actions to move illegally obtained money across borders.

Entities that must adhere to regulations for crypto assets:

  • crypto exchanges;
  • traditional financial companies;
  • virtual asset service providers (VASPs);
  • crypto miners;
  • crypto issuers.

In October 2021, the Financial Action Task Force (FATF) revised its guidelines concerning a risk-based approach to VASPs. The guidance includes recommendations for implementing AML cryptocurrency measures, such as customer due diligence, transaction monitoring, and reporting of suspicious activities.

Cryptocurrency AML Compliance

Crypto AML compliance is a crucial set of measures implemented by VASPs to prevent and detect financial crimes within the crypto industry. Given the anonymous nature of cryptocurrencies like Bitcoin and USDT, they have been occasionally exploited for money laundering activities. To counter this, USDT AML check and AML Bitcoin are essential on crypto exchanges and VASPs companies.

Crypto companies and service providers are urged to adopt these measures to ensure thorough customer due diligence, continuous transaction monitoring, and reporting of suspicious activities. By implementing robust AML protocols, they contribute to a more secure and compliant environment, discouraging illicit activities with the use of digital assets. This proactive approach not only safeguards the integrity of the crypto space but also creates trust within the broader financial ecosystem.

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