Anti-Money Laundering (AML)

An acronym for “anti-money laundering“, AML is a collection of rules, regulations, financial laws, strategies, and best practices used by financial institutions and businesses (like cryptocurrency exchanges and banks) to keep criminals from laundering illegally received currencies.

They do this by detecting and identifying suspicious transaction activity on the blockchain or within the banking network that attempts to convert illegally obtained currencies into another currency.

This primarily takes the form of converting cryptocurrencies into fiat money, and moving currencies into different wallets and accounts in hopes of shielding the true identity of the owner.

AML policies have become more and more important as cryptocurrencies have become more appealing to criminals.

Criminals are drawn to cryptocurrencies and other digital assets due to their pseudonymous status and ease of sending and receiving funds virtually anywhere in the world, far faster than traditional money transfer methods.

It’s estimated that over US $2 billion was laundered through crypto exchanges in 2020.

Related Terms

Money Services Business (MSB)

A business, or person acting as a business, that transmits, exchanges, or converts money. MSB regulation is part of a larger AML program overseen by FinCEN.

Pseudonymity

In blockchain security, the pseudonymous nature of certain blockchains keeps a network user’s identity hidden from other network users while still linking all of the transactions made by that person to a pseudonymous identity that CAN be tracked by almost anyone.

Bitcoin ATM (BTM)

A Bitcoin ATM (BTM) is an ATM machine that lets you buy and sell Bitcoin (BTC), transfer Bitcoin (BTC) to someone else, and some even let you sell Bitcoin (BTC) and withdraw cash. Surprise! A Bitcoin ATM is very similar to a traditional bank ATM, in that you can deposit and withdraw fiat money. To […]

Sam Bankman-Fried (SBF)

At one point one of the richest people in crypto, Sam Bankman-Fried and cryptocurrency exchange FTX have come crashing down to earth in a matter of days following reporting that his Alameda Research hedge fund was undercapitalized and he allegedly took customer funds out of FTX illegally and funneled them to Alameda Research.

Peer-to-Peer (P2P)

Describes the sharing of data or assets between 2 or more parties without any central authority making the transaction happen. P2P exchanges tend to offer transactions that are censorship resistant, cheap, private, and secure.