There once was a time not that long ago when AML (Anti-Money Laundering) compliance was a costly and complex process for large companies and banks.
The advent of blockchain technology and the increasing popularity and adoption of cryptocurrency provided both opportunities and challenges to AML compliance. Whilst in the traditional financial world, AML compliance and adherence to a universal set of guidelines, is mandatory and there are sanctions such as fines for non-compliance institutions, in the crypto world, the same sort of universal compliance has yet to fully evolve.
Despite the lack of regulation, or because of it, the crypto world has boomed. It is now at a point where there is so much institutional investment and adoption that it is to differentiate where traditional finance ends and crypto begins.
Crypto exchanges have quickly become an integral part of the financial ecosystem systems. However, there is a strong argument that with universally recognised regulation will finally bring crypto the global adoption and credibility it needs.
Thorough AML compliances are needed because money laundering in crypto is an ongoing problem. In 2019, criminals laundered US$2.8 billion through crypto exchanges. In the same year, transactions linked to criminals represented 2.1% of all transactions.
However, in 2020, as more and more crypto exchanges sought the transparency and trust that crypto users now demanded, the importance of AML in crypto became ever more apparent. Criminal cryptocurrency transactions in 2019 accounted for US$21.4 billion, but in 2020 with more adoption of AML compliance amongst crypto exchanges, the figure fell to US$10 billion. AML compliance in cryptocurrency works.
Yotam Namir , the founder of TechView a leading technology and compliance company, agrees:
“Money laundering in crypto is a global problem, but through technology, adoption and regulation, it is getting better, fast.”
And it is true, the applications of blockchain technologies will eventually fuel the AML process. Until then, regulation and an acceptance of a global set of AML standards centred around those proposed by the Financial Action Task Force (FATF), can ensure that despite the integrity and transparency offered by blockchain technology, people are able to trust the crypto exchanges and the crypto world in general.