Anti-Money Laundering (AML)

What does Anti-Money Laundering (AML) mean?

The laws, regulations and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income.

Main Idea:

By providing strict definitions and rules for Anti-Money Laundering (AML), governments pass on the burden of preventing illegal uses of funds to financial institutions and banks. AML is the overarching term for the range of processes these firms must have in place to meet such regulations (national and international).

The Controversy over Cryptocurrency:

Cryptocurrency ledgers are a popular application of blockchain technologies. If the blockchain technology that underlies the cryptocurrency ledgers and the trading platforms are fully decentralized, there are no identifiable financial entities to hold accountable for compliance. As a result, central banks and regulatory commissions frequently object to cryptocurrency because they claim they will incentivize more criminal behavior.

Advocates for cryptocurrency, on the other hand, argue that the easiest and most widely used way to use funds for criminal purposes is to use cash printed by the central banks.

As always, the argument for regulation such as Anti-Money Laundering depends on your assessment of the costs versus benefits.

Used in a Sentence:

Before issuing credit or taking deposits, traditional financial institutions must comply with two sets of regulations for screening and monitoring their customers: AML (Anti-Money Laundering) and KYC (Know Your Customer) regulations.

Last Updated: January 23, 2023