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What is anti-money laundering and how does it relate to cryptocurrency?

 Что такое борьба с отмыванием денег и как это касается криптовалюты

What is the fight against money laundering and how does it relate to cryptocurrency (photo: pixabay) Author: Sergey Novikov

The fight against money laundering is one of the most important tasks in the field of finance and banking. Cryptocurrency has also become a focus in this process.

Read more about what tools help prevent criminals from turning illegally obtained cryptocurrency into cash in the RBC-Ukraine article.

The role of cryptocurrencies in the global financial system continues to grow. Digital assets, in turn, have opened up more opportunities for cross-border fund transfers. However, the anonymous nature of these transactions often poses a risk to financial markets as they facilitate the movement of illicit funds.

What is AML

AML (from English Anti Money Laundering) – combating money laundering obtained by criminal means. This formulation first appeared in 1989 following the creation of the international organization The Financial Action Task Force (Financial Action Task Force – ed.).

Today, the FATF sets global standards for anti-money laundering legislation. And many states have already implemented AML principles. An important component of this process is the rejection of the anonymity of financial transactions and the fight for their transparency.

In particular, financial institutions use AML to verify businesses that deal in cash or have cash assets, hold money in multiple accounts and banks, and transfer it abroad.

AML and cryptocurrency

An example of AML in the cryptosphere is the mandatory KYC (customer identification – ed.) procedure, which must be completed by all users of a crypto exchange who want to use its functionality.

Starting in 2020, when the Fifth EU Directive came into force, verification became mandatory for all crypto exchange users. Currently, most large centralized exchanges adhere to this requirement.

Today, AML policies on crypto exchanges typically contain a number of measures aimed at ensuring compliance with international anti-money laundering standards.

The main components of an AML policy include:

AML protection is important for the cryptocurrency market for several reasons:

1. Prevention of abuse. Anti-money laundering helps prevent cryptocurrency from being used to launder the proceeds of crime. This helps maintain the rule of law and prevents the financing of terrorism and other criminal activities.

2. Investor protection. The introduction of AML rules helps protect investors from fraud and manipulation in the cryptocurrency market. This creates confidence in the market and increases its stability.

3. Legality and regulation. Including cryptocurrencies in the fight against money laundering contributes to their legal status and regulation. This allows governments and regulators to monitor the cryptocurrency sector and enforce the necessary rules and regulations.

4. International cooperation. Combating money laundering in the cryptocurrency sector requires cooperation and information sharing between different countries. This contributes to the creation of international standards and joint efforts to combat crime.

5. Protecting the stability of the monetary system. Money laundering can undermine the stability of the financial system. Combating this in the cryptocurrency sector helps reduce risks to the financial system.

In many countries, the activities of crypto exchanges are subject to regulation by government authorities. This provides additional control and oversight over the implementation of the AML policy. In countries where digital assets are not legal tender, industry self-regulation is common.

Legislation in the field of combating money laundering in Ukraine

In Ukraine, the fight against money laundering and terrorist financing is also regulated by law. AML procedures are based on international Financial Action and Anti-Money Laundering (FATF) standards and guidelines.

The main law regulating the fight against money laundering in Ukraine is the Law of Ukraine On Preventing and Combating Money Laundering and the Financing of Terrorism” dated October 14, 2014.

Under this law, banks and other financial institutions are required to conduct AML procedures, such as customer verification and monitoring of financial transactions, and cooperate with government authorities in this area.

Control and supervision of compliance with legislation on combating money laundering and the financing of terrorism in Ukraine is carried out by the National Bank of Ukraine and the State Financial Monitoring Service.

Regulators and authorities in Ukraine are constantly improving and expanding their anti-money laundering rules and regulations in the cryptocurrency sector, including requirements for cryptocurrency exchanges and other service providers, as well as information retention and reporting.

AML verification on the WhiteBIT crypto exchange

The largest players in the cryptocurrency market conscientiously adhere to AML principles. Thus, one of the largest European exchanges with Ukrainian roots – WhiteBIT – does not conduct any transaction without checking funds from illegal activities, and AML verification allows you to avoid connections with “dirty” assets.

WhiteBIT meets the highest security requirements and is one of the top three exchanges in terms of reliability with a high AAA rating, according to audits by and the certification platform in 2022.

All deposits and withdrawals on the exchange are also verified by AML. If an address is designated as high-risk, it means that it may be under suspicion due to one of the prohibited activities:

The WhiteBIT exchange also allows you to independently check the address with which you plan to interact for involvement in money laundering. The commission for using the instrument is 1 USDT. In order to use this tool, you must:

  • In the top menu of the exchange website, open the AML page;
  • Select the cryptocurrency you want to check;
  • Enter your address and click “Check”.
  • The algorithm will check the address. As a result of the check, pay attention to the signals and risk scale. They will show the signs to watch out for, as well as the risk percentage.

    By the way, the exchange also offers free daily AML checks to WBT owners.

    Consequently, with the growing popularity of cryptocurrency, regulators around the world are constantly updating and expanding their anti-money laundering rules and regulations in the cryptocurrency sector.

    AML procedures are important for the financial sector because they help prevent the use of the financial system for money laundering and terrorist financing, as well as reduce risks for financial institutions.

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