AML
Anti-Money Laundering — a set of policies and procedures that exchanges and financial institutions use to prevent illicit financial activity. In practice, this means monitoring transactions for suspicious patterns, applying withdrawal limits, and requiring identity verification (KYC) before larger transactions — requirements are typically set by the regulator in the exchange's operating jurisdiction.
How it works
Anti-money laundering is a set of rules requiring financial companies to check where a client's funds come from and to report suspicious activity. In crypto these requirements apply to exchanges, brokers and custodial wallets.
In the European Union the framework comes from the AMLD directives and the MiCA regulation, which since 2024 has extended unified rules to all crypto service providers. A separate requirement is the travel rule: transfers between platforms must carry sender and recipient data.
The checks are often confused with KYC, though they are different. KYC is identity verification at sign-up, a one-off procedure. AML is ongoing monitoring of activity afterwards: analysis of amounts, frequency and the origin of funds.
What is actually checked
- The source of fundsA large deposit may require documents: statements, a sale agreement, proof of income. This is standard procedure rather than a sign of suspicion.
- The wallet's on-chain historySpecialist services assess whether funds passed through mixers, sanctioned addresses or hacked platforms. The assessment is probabilistic and false positives do occur.
- Unusual behaviourAn abrupt change in activity, splitting amounts, transfers immediately after withdrawal — all of these prompt further questions.
- Links to sanctions listsScreening covers both the client's identity and the addresses they interact with.
What to watch for
The practical risk for an ordinary user is not a fine but a freeze. If funds arrive from an address with a poor history, a platform may restrict withdrawal pending review, and that takes weeks. Buying crypto from a random private seller is the most common way to acquire such a history without doing anything wrong yourself.
A simple rule reduces the risk: fund accounts from platforms that are themselves regulated, and keep purchase records. A statement showing where and when coins were bought settles most questions in one go.