How to Check Cryptocurrency for Anti Money Laundering (AML)

Anti-money laundering (AML) is the fight against money laundering. It is a large set of processes, rules, and regulations that help stop money laundering, funding for terrorists, and other financial crimes. Also, the method is meant to stop fraud that uses personal information.

Differences between AML and KYC

In the past few years, cryptocurrencies have changed a lot. They used to be a new, unexplored idea, but now big banks are investing in them. Regulators have to be able to change with the times and keep weighing the pros and cons of this type of asset.

As required by regulators, exchanges are putting in place KYC user verification and AML to keep track of transactions that could be linked to money laundering. This directly affects honest users: if the exchange finds out that your cryptocurrency came from a dishonest source (even if you got it legally), you will be taken to court.

According to the directive that the European Union passed, all countries must have rules in place by July 2020 to stop people from using cryptocurrencies to launder money. KYC is the main point.

Even though AML and KYC have pretty much the same goal, you shouldn’t mix them up. KYC, which stands for “Know Your Customer,” is just one of the steps that make up AML as a whole. “AML/KYC” is a phrase that you will see a lot.

In simple words:

• KYC is the process of checking the documents of a user.
• AML is the process of making sure transactions are legal. AML doesn’t care as much about who sends transactions as it does about whether or not they are legal.

Both of these things are done with the help of software. Before being able to use the service, a user must pass KYC. There are no standard rules for collecting information, so each platform decides for itself what documents and information it needs. Users often don’t like having to go through KYC, at least because it wastes their time. It can make people not want to use the service at all.

AML involves keeping track of how money moves and, if necessary, giving that information to the right departments in the future. The user can’t see or take part in this process because it all happens automatically in the background.

Why is verifying cryptocurrencies so important?

Verifying cryptocurrencies from individuals, mixers, or other unregulated sources is a good idea to avoid unpleasant situations (we will tell you how to do this below). She may have been involved in scams, the black market, funding terrorism, or other illegal activities in the past. Most of the time, coins stolen from exchanges or hacked DeFi protocols are marked as dirty.

The blockchain keeps track of each coin and its share, from the time it was made by a miner until now. So, you might have trouble if you send a dirty cryptocurrency to a regulated platform, like a crypto exchange, and the AML system flags it as suspicious. You will have to show that you are not a part of any criminal plans. All of the assets in the exchange account will be frozen until the case is over. So, it’s important to know how to check if a cryptocurrency scam is real and keep yourself and your money safe.

How AML is Implemented on Cryptocurrency Exchanges

As cryptocurrency exchanges become more popular, regulators are trying to make sure that they have KYC/AML checks and are extending their reach. When exchanges and regulators work together, the chances of fraud in financial transactions go down.

In this area, it is clear that the United States is in the lead. FinCEN is in charge of keeping assets in the US from being used illegally. This is to protect the US financial system. It requires cryptocurrency exchanges to use KYC and AML compliance software that works well.

Summary

Special services make it easy to check a transaction for “dirt,” so it’s a good idea to take advantage of this feature. But it’s important to note that as regulations get stricter, the chance of getting bad bitcoins or other cryptocurrencies goes down. Users can feel safe using exchanges and wallets. And if you buy coins on the exchange with a bank card, you almost never have to worry about getting dirty cryptocurrency.