AML

AML stands for anti-money-laundering: the set of laws, regulations, and internal procedures designed to prevent criminals from disguising illegally obtained funds as legitimate money. In crypto, AML obligations fall mainly on businesses that handle customer funds, such as exchanges, brokers, and payment processors, which must monitor transactions, flag suspicious patterns, and report them to authorities.

In practice, AML programs combine several tools. Customer identification (KYC) establishes who is transacting; transaction monitoring software then watches for red flags such as rapid transfers through many wallets, deposits linked to known hack addresses, or structuring deposits just below reporting thresholds. For example, if a user deposits coins that blockchain-analytics tools trace back to a sanctioned mixing service, an exchange's compliance team may freeze the deposit and file a suspicious activity report with its national financial intelligence unit.

A common misconception is that AML rules ban privacy or self-custody; they generally regulate intermediaries and their reporting duties rather than individuals holding their own coins, though rules differ by jurisdiction. Because public blockchains record every transaction permanently, crypto is in some ways easier to trace than cash, and an industry of analytics firms has grown around helping regulated companies meet AML obligations. For everyday users, AML mostly appears as occasional requests to explain the source of funds or delays while a deposit is reviewed.