In today's technological era, money laundering is always a concern, especially in the crypto field. Therefore, anti-money laundering (AML) is unnecessary for many. Why is AML important? Let's explore the issue of AML in the article below.
1. What is AML?
AML stands for 'Anti-Money Laundering', which means preventing illegal proceeds from becoming clean, legitimate funds. It includes legal, regulatory, and monitoring activities to prevent drug trafficking, tax evasion, or criminal activity funds from becoming legitimate sources of clean money.
For example, anti-money laundering ensures that customer identities are verified before accounts are opened to prevent criminals from using bank accounts to launder money.
2. Money laundering in the cryptocurrency market
What is money laundering?
In the cryptocurrency field, buying and selling is achieved through competitive trading, which is conducted through multiple countries or different financial institutions, resulting in the source of funds being unclear.
For users of e-commerce platforms, bank account balance management is an important aspect of credit risk prevention for business operators ...
For financial regulatory bodies and governments, preventing money laundering is key to addressing money laundering activities in the financial sector. To avoid financial abuse, such as money laundering or financing, we need to ensure the quality of money laundering activities.
How do foreign exchange trading price trends work?
Trade methods
: E-commerce platforms typically involve a series of e-commerce processes.
Creating anonymous accounts: Criminals can create cryptocurrency wallet accounts or accounts on anonymous exchanges without identity verification.
Converting proceeds of criminal activity into cryptocurrency: Money from criminal activities can be converted into cryptocurrency through intermediary services or cryptocurrency exchanges.
Using money laundering services or mixers: Some money laundering services or mixers can blend cryptocurrency transactions to obscure suspicions, making it difficult to identify the source of funds.
2. Cash transfers: Suspects can raise suspicion through cash transfers.
Transferring funds across different countries or financial systems: Moving funds across different countries or financial systems obscures the source of funds and makes tracking difficult.
Withdrawing funds from the cryptocurrency system: Once the money is laundered, criminals can withdraw funds from the cryptocurrency system and use cash or other currencies without explaining the source of the funds.
: Currently, there are over 1 million people worldwide using Bitcoin (BTC) wallets, while the balance of Bitcoin (BTC) wallets is only half of that of 1 million people.
3. The history of anti-money laundering
Anti-money laundering legislation has a long history of development, but it can be summarized into major phases.
Initial stage
Initial development: In the 1970s and 1980s, developed countries began implementing measures to combat money laundering, as drug trafficking and organized crime were rampant at the time. These criminal activities prompted governments to take international measures to prevent the use of the financial system for money laundering.
Wallet: Significant events have drawn attention to the issue of slavery, including the discovery that criminals use banks and financial systems to hide illegal funds. This has prompted countries to mobilize organizations (such as the United Nations and the Organisation for Economic Co-operation and Development (OECD)) to cooperate and jointly develop international standards to combat financial terrorism.
Subsequent development stage
International regulations: In the 1990s, countries began to formulate laws and regulations to address climate change issues. These regulations typically require security in reporting and internal control systems at the national level.
Strengthening international cooperation: During this period, international cooperation mechanisms were strengthened, including the establishment of specialized anti-money laundering agencies and signing bilateral and multilateral agreements to support information exchange and judicial cooperation among countries.
Modern stage
Technological development: Creating conditions to combat illegal proceeds. Information facilitates the transfer and improvement of this technology, providing convenience for law enforcement work.
Updating laws and regulations: Due to technological advancements and changes in organizational transformation methods, money laundering laws and regulations must be constantly updated to address new challenges.
: The formation of anti-money laundering laws is a lengthy process that continuously adjusts and evolves with historical progress and changes in the economic and political environment.
4. Anti-money laundering in Crypto
Measures and legal actions taken against money laundering or financing cryptocurrency activities.
Did you know? The answer is:
Identity verification (KYC – Know Your Customer): Cryptocurrency exchanges typically require users to provide personal information and undergo identity verification before trading. Some reputable exchanges you might consider include: Binance, MEXC, Coinbase, etc.
Regulation: Exchanges provide services to users based on regulatory requirements to detect suspicious activities, large transaction amounts, or indications of fraud or money laundering. Regulatory services often have similar regulatory measures.
Credit report: A credit report of the person responsible for institutions or individuals engaged in cryptocurrency trading indicates payment or funding activities.
International cooperation: Due to globalization, cooperation between countries and organizations is crucial for ensuring effective anti-money laundering efforts.
Information analysis: Using technology and software to analyze transaction data, entities, and account relationships for illicit activities or guidelines.
In light of the above, appropriate measures should be taken to prevent the generation of illegal proceeds and to investigate legally to prevent the generation of illegal proceeds.
5. The four crucial reasons for anti-money laundering in the crypto market
The four main reasons for anti-money laundering in the cryptocurrency market
Protecting users: Anti-money laundering helps protect users from fraud and scams. When transactions are regulated, efforts are made to ensure that transactions are secure and responsible.
Ensuring legal compliance: Regulatory bodies in the industry should strictly adhere to laws and regulations to ensure that companies operate in compliance with the law.
Enhancing industry prospects: Effective anti-money laundering can enhance the prospects of the cryptocurrency industry. Every year, large numbers of investors and traditional investors profit from the use and acceptance of cryptocurrencies.
Preventing illegal activities: Anti-money laundering uses cryptocurrency for illegal activities, including money laundering, tax evasion, and criminal organizations.
6. Excellent KYC and AML
Some people may misunderstand KYC and AML as similar or identical. The main reason is that both are related to network and risk control, and the protection of financial service institutions from criminal activities, and are typically implemented by the same organizations.
However, despite the close relationship between KYC and AML, they are still two distinct concepts in terms of purpose and method:
KYC (Know Your Customer): KYC follows procedures to verify the identity of individuals, ensuring that they are who they claim to be. KYC necessarily collects personal data such as identification, address, and other forms of financial crime. KYC aims to prevent and combat money laundering and ensure that every criminal can obtain a legal identity.
AML (Anti-Money Laundering): AML focuses on preventing money laundering activities and the use of the financial system for illegal purposes. AML includes KYC as a fundamental component, involving regulation, reporting suspicious activities, and implementing internal controls to prevent money laundering.
Overall, while KYC and AML are related concepts and are often implemented together, they have different purposes in combating financial crime and ensuring the regulation of the financial system.
7. Conclusion
Most importantly, anti-money laundering (AML) regulations play a vital role in preventing the use of cryptocurrency for illegal activities such as money laundering, tax evasion, and criminal organizations. By implementing anti-money laundering measures, organizations operating in the cryptocurrency field can protect users, ensure legal compliance, enhance industry regulation, and prevent illegal activities.
In addition, understanding the difference between KYC and AML is important for criminal prosecutions and comprehensive law enforcement in the field of financial crime.