Crypto AML Guide: All You Need to Know in 2024
Everything you need to know about crypto AML compliance this year.
Everything you need to know about crypto AML compliance this year.
Governments and institutions are intensifying their focus on Anti-Money Laundering (AML) compliance in crypto. There are a number of reasons for this. This includes
According to an FBI report, losses to crypto investment scams in the US alone totaled $3.94 billion in 2023—an increase of 53% over 2022.
Penalties for non-compliance and insufficient transaction monitoring are another pain point for businesses. In 2023, crypto companies faced over $5.8 billion in fines over inadequate AML programs. To mitigate this growing risk, crypto businesses should build robust AML policies and implement necessary compliance measures.
Let’s dive into the specifics of crypto AML compliance and how to get it done right.
Money laundering is an ongoing concern in crypto, as criminals seek to exploit its anonymity and decentralized nature for illicit purposes. Several key trends have emerged in the realm of crypto money laundering:
There are several common red flags that may indicate suspicious activity:
Suggested read: Politically Exposed Person (PEP)—All You Need to Know
The presence of one or more of these red flags doesn’t necessarily imply illicit activity. However, they do require proper due diligence and ongoing monitoring, as well as timely submission of suspicious activity reports and cooperation with law enforcement.
Anti-money laundering (AML) refers to the set of regulations, policies, and procedures designed to prevent and detect money laundering and other illicit activities. Crypto AML measures aim to ensure that cryptocurrency exchanges, wallet providers, and other virtual asset service providers (VASPs) comply with regulatory requirements. VASPs must therefore comply with applicable AML regulations and licensing requirements in the jurisdictions where they operate. This may include registering with regulatory authorities, obtaining licenses or approvals, and undergoing periodic audits or examinations to ensure compliance.
Suggested read: AML Cryptocurrency Regulations Around the World
Suggested read: Complete Guide to Suspicious Activity Reports
Suggested read: 6 Key Steps to a Successful Anti-Money Laundering (AML) Program in 2024
Know Your Customer (KYC) and Anti-Money Laundering (AML) policies outline the procedures and requirements crypto businesses must follow to verify the identities of their customers and prevent illicit activities such as money laundering and terrorism financing. While specific policies may vary depending on the jurisdiction and the nature of the cryptocurrency business, here is a general overview:
The Travel Rule was implemented by the Financial Action Task Force (FATF) to set international standards for combating money laundering, terrorist financing, and other illicit financial activities. The FATF introduced an extension of the Travel Rule for Virtual Asset Service Providers (VASPs) to enhance transparency and regulatory oversight within the cryptocurrency industry.
The Travel Rule mandates that financial institutions, including cryptocurrency exchanges and wallet providers, must share certain customer information when conducting transactions above a certain threshold. The purpose of the Travel Rule is to enhance anti-money laundering (AML) efforts and combat illicit financial activities by ensuring that relevant information about parties involved in transactions is shared between financial institutions. This helps to facilitate the tracing and monitoring of funds and enhances transparency in the financial system.
Key aspects of the Travel Rule in the context of crypto include:
Suggested read: What is the FATF Travel Rule? The Ultimate Guide to Compliance (2024)
Sumsub offers a six-month free trial of its Travel Rule compliance solution. The product facilitates secure information transfers between VASPs in accordance with compliance requirements, enabling crypto firms to both send and receive Travel Rule messages for corresponding transactions. The product ensures future-proof global compliance, including the EU’s Transfer of Funds Regulation (TFR) and Markets in Crypto-Asset (MiCA) regulations. Try our Travel Rule solution today to steer clear of huge regulatory fines, gain customer trust, and keep your reputation flawless.