What Is AML (Anti-Money Laundering) in Crypto?
AML, or anti-money laundering, is the set of rules designed to stop criminal proceeds from being disguised as legitimate income and to prevent terrorist financing. Crypto exchanges apply it through identity checks, transaction monitoring and suspicious activity reports.
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AML, or anti-money laundering, is the set of rules designed to stop criminal proceeds from being passed off as legitimate income and to prevent terrorist financing. Like banks and other financial institutions, crypto exchanges are required to follow these rules. In practice, AML comes down to knowing your customers, monitoring transactions and reporting suspicious activity to the authorities.
How does money laundering work?
Money laundering is usually described in three stages:
- Placement: illicit funds enter the financial system, for example by splitting cash into small deposits.
- Layering: the money is moved and converted many times to obscure its trail; in crypto, this can mean rapid transfers across addresses, assets and networks.
- Integration: the cleaned money re-enters the economy looking like legitimate income.
AML rules aim to break that chain, especially at the points where money enters or leaves the financial system. In crypto, those points are mostly centralized exchanges.
How do crypto exchanges apply AML?
Platforms first verify customers’ identities (KYC) and then monitor their activity continuously. Funds gathered from many accounts in a short time and sent to a single address, large deposits from unclear sources and transfers linked to sanctioned wallet addresses all get flagged for review.
Because blockchain records are public, on-chain analytics tools can trace funds address by address. Exchanges use them to check whether deposits come from addresses tied to scams, ransomware or hacks. If funds arrive from an address previously linked to fraud, the platform may ask for documentation on their source before processing the transaction.
The FATF and the travel rule
International anti-money laundering standards are set by the Financial Action Task Force (FATF). In 2019, the FATF extended those standards to virtual asset service providers.
Its “travel rule” requires service providers to share sender and recipient information for crypto transfers above certain thresholds, mirroring how bank wire transfers carry originator details. Countries are implementing the rule with different thresholds and timelines.
AML rules in Turkey
In Turkey, the authority responsible for fighting money laundering is MASAK, the Financial Crimes Investigation Board. Crypto asset service providers were added to its list of obliged entities in 2021 and must carry out customer identification, report suspicious transactions and keep records. Legislation passed in 2024 also brought these platforms under the licensing and supervision of the Capital Markets Board.
How do AML rules affect users?
Being asked about the source of funds on large transactions, having a withdrawal held for review or being blocked from sending to a sanctioned address are all results of AML rules. These checks can cause delays, but they are a condition of a platform operating legally. Since the history of funds you deposit from your own wallet can be checked, accepting crypto from unknown sources carries its own risk.
Frequently asked questions
Why has my exchange account been put under review? Unusually large or frequent transactions, links to an address flagged as risky, or incomplete identity information can all trigger a review. The platform will usually ask for additional documents.
Do AML rules apply to decentralized exchanges? How decentralized protocols fit into AML rules is still debated in many countries. Centralized exchanges that send funds to or receive funds from these protocols, however, continue to apply AML checks to their own customers.
What’s the difference between AML and KYC? KYC is the step of verifying a customer’s identity. AML is the broader framework that includes KYC as well as transaction monitoring and reporting.