Content corrected by an authorized editor Karol Kiełtyka - 9/22/20, 11:24 AM
Hello. Could you explain to me what AML is, how it works, why goverments apply these regulations to crypto exchanges? Thanks in advance.
AML, Anti Money Laundering is a set of procedures, often secret, to prevent money laundering. AML monitors the crypto market for flows and transaction characteristics. It takes into account the value of transactions, frequency, repeatability, the same participants and the history of the flow. Depending on the country's legal system, these procedures may have different thresholds of interest in transactions or users, but they always focus on transactions.
Particular interest is usually aroused by measures and trade with embargoed countries. The more so as market participants may be caught up in dangerous transactions completely unconsciously, which would already be very difficult in traditional economic exchange, but in the crypto sector it is relatively likely.
The steps to prevent money laundering include verification of each customer's identity and monitoring of their transactions by the service or financial institution. The process may also include asking customers for more details if a bank or institution detects suspicious activity, or if a customer reaches a specific trigger point that requires due diligence. A financial institution may ask a person making a large deposit into their account to prove where such funds come from. For honest clients who do not understand the reason for such a request, this may seem like an unnecessary problem, but in fact AML reviews are crucial to prevent money laundering.
The Anti-Money Laundering and Terrorist Financing Act imposes numerous obligations on entrepreneurs to monitor and analyze transactions carried out by their clients. Their proper fulfillment protect entrepreneurs from administrative and criminal penalties related to improper performance of statutory obligations.
I might say a little bit about history because colleagues have already explained what AML is.
Anti-money laundering initiatives gained global importance in 1989, when a group of countries and organizations from all over the world set up the Financial Action Task Force (FATF). . Its mission is to develop international standards to prevent and promote the implementation of money laundering. In October 2001, shortly after the September 11, 2001 terrorist attacks on the United States, the FATF extended its mandate to include efforts to combat terrorist financing.
Another important organization involved in the fight against money laundering is the IMF International Monetary Fund. Like the FATF, the IMF has also pressed the 189 member states to meet international standards in order to thwart terrorist financing.