In the early years of cryptocurrency’s existence, there were not many safety concerns raised. However, as the crypto industry developed, it started to attract regulators’ attention. The reason was the use of crypto assets by the countries under sanctions, terrorists, and criminals with the purpose of money laundering.
Even though crypto money laundering is just a tiny part of overall money laundered in the traditional market, there are still a lot of concerns. The fact is that due to its decentralized nature, crypto opened more opportunities for criminals to hide the trace of illegally obtained funds. So, there is a need for stringent regulations and oversight of crypto projects and platforms that offer crypto services.
Crypto exchanges (especially those offering an institutional trading platform) are now subject to anti-money laundering (AML for crypto) regulations similar to those applied to money services businesses. That means, the Securities and Exchange Commission (SEC), the Financial Crimes Enforcement Network (FinCEN), and state regulators consider these regulations applicable to crypto exchanges and businesses.
Crypto and Money Laundering
Why did crypto become the focus of regulatory attention? Here are some reasons:
- Digital assets are easily moved between wallets.
- Crypto is easy to split, mix, run through several transactions, and recombine.
- Blockchain does not verify identity – just a blockchain address.
- NFTs are an alternative to physical art money launderers, for their price is subjective.
There should be regulatory standards to control transactions and stop illegal actions with crypto. The answer is AML cryptocurrency compliance.
Who Works with Anti-Money Laundering Crypto Compliance?
The Financial Action Task Force (FATF) is an intergovernmental organization that sets global standards for anti-money laundering. Regulators worldwide follow the FATF regulations, including the “Travel Rule for Crypto.” This rule requires VASPs (virtual asset service providers) to gather and report customer information during transactions with crypto assets. To comply with regulations, exchanges implement AML checks (like WhiteBIT AML check service). It helps track user transactions, identify illegal activities, and report them to authorities.
FinCEN (Financial Crimes Enforcement Network) follows the FATF rules and implements guidance that defines crypto exchanges as money services businesses. It brings the crypto industry under financial crime regulations. Here is what AML compliance includes:
- KYC verification
- Customer and risk assessment
- Transaction monitoring
- Reporting suspicious activities
- AML compliance training
- Using AML software.
Cryptocurrency AML laws are regularly updated, so the crypto industry participants should monitor the regulatory environment and catch up with the latest issued standards. By staying up-to-date with the latest regulations and implementing effective AML compliance programs, the crypto industry can continue to grow and develop responsibly and sustainably.
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