A set of international laws enacted to curtail criminal organizations or individuals laundering money through cryptocurrencies into real-world cash.
Anti-Money Laundering (AML) refers to a set of laws and regulations enacted to prevent the illegal movement of money worldwide. Money laundering refers to the process of concealing the origins of (illegally obtained) cash by passing it through a usually complex sequence of transfers or transactions. These transactions are generally legitimate and hence would not be flagged, thus allowing the original owner of the illegitimate funds to use the funds for lawful purposes.
AML targets criminal activities like trading in illegal goods (drugs, contraband, etc.), public office corruption and tax evasion, to name a few. It deals explicitly with methods concealing these crimes and the money obtained from these acts.
Financial institutions play a significant role in AML. If criminals cannot successfully move the proceeds of these illegal acts, they would not be incentivized to perform these crimes. Therefore, financial institutions are required to monitor customers’ transactions and deposit records, especially when they appear to be larger than ordinary.
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