AML

Anti-money laundering rules aim to stop criminals from disguising the proceeds of crime as legitimate funds. For crypto businesses this means verifying customers, monitoring transactions for suspicious patterns, screening addresses against sanctions lists, and filing reports with authorities. KYC is the identity component of a broader AML program.

A key international standard is the Financial Action Task Force's travel rule, which requires exchanges to share sender and recipient information for transfers above a threshold, as banks do for wire transfers. Many countries have implemented it for crypto. Blockchain analytics firms such as Chainalysis help exchanges trace funds and flag addresses linked to hacks, darknet markets, or sanctioned entities.

AML enforcement has shaped the industry. Binance paid over 4 billion dollars in 2023 to settle US charges that included AML failures. Tornado Cash, a privacy tool on Ethereum, was sanctioned by the US Treasury in 2022, although a federal appeals court later ruled in 2024 that the sanctions on its smart contracts exceeded the government's authority.