The entrance of cryptocurrencies into the world back in 2007 was one that was met with criticism and skepticism from major players in the banking and finance sector. Fast-forward to 2018, cryptocurrencies have managed to not only revolutionize the finance and banking industry but have attracted the financial backing of major players in the sector. Cryptocurrencies have provided so many benefits such as lowered fees, increased security, decentralization, confidentiality, worldwide recognition and usability, immediate settlement, and individual ownership. However, just like a double-edged sword, cryptocurrencies have also brought about their own sets of drawbacks.

For instance, research shows that nearly half (44%) of all Bitcoins in circulation are associated with illegal activities. Also, a quarter (25%) of all Bitcoin users have also been linked to criminal activities such as illegal hacks, trading of illegal drugs, terrorism funding, illegal pornography, and money laundering. Money laundering is the process of concealing large sums of money that have been acquired from illegal activities, and making it seem as though they came from legitimate sources. All the policies, procedures, laws and regulations that are designed to stop the practice of money laundering are referred to as Anti-Money Laundering (AML).

Origin of Anti-Money Laundering (AML)

As stated earlier, Anti-money laundering represents a set of policies that have been specifically designed to stop the practice of generating income through illegal activities. AML first rose to global recognition around 1989 when the Financial Action Task Force (FATF) was formed to combat money laundering. FAFT is an international body comprised of several governments that have set up standards to stop money laundering activities through the implementation of these standards. FAFT is currently headquartered in Paris, and was created at the request of the G7 due to the rise of financial crimes such as money laundering.

In February 2012, the FATF developed a set of recommendations that were later adopted by all of the 35 member countries and two regional organizations as comprehensive measures in the war against terrorist financing, money laundering, and financing development of wars of mass destruction. While it was the FATF’s job to promote the measures, the task of implementing these measures fell to the leaders of the various member countries. In 2000, FATF initiated a name and shame system where they publicly announced any member country that failed to enforce these AML laws or was not actively engaged against money laundering. The effect of that led to the worldwide adoption of AML laws and regulations.

Why is AML Necessary?

Money laundering has become an extremely prevalent issue in the global economy as criminals are coming up with very ingenious ways of covering up their tracks. Therefore, it’s not uncommon for such groups to utilize day to day activities such as banks, credit unions, and financial service providers to try and “clean” their dirty money. Due to this, banks, financial institutions, and governments are constantly trying to find new ways to combat money laundering with new policies being set in place to help this effort. Banks and financial institutions that facilitate money laundering, even unknowingly, suffer hefty penalties.

Therefore, financial institutions are relying on a set of rules, regulations, and procedures that are aimed at acquiring customer information known as KYC (Know Your Customer). KYC procedures mean that banks should collect their customer’s information during account openings to facilitate proof of identity and proof of address. Proof of identity includes personal identification documents such as a passport, driver’s license, or national I.D.  Proof of address usually ensures that you are a respective resident of the area you claim to reside in. Apart from helping banks avoid hefty penalties or being put out of business, KYC helps banks and financial institutions comply with universal AML standards.

Countries Considered High-Risk in Their AML Monitoring Standards

Ever since FATF launched its AML standards and measures, it has adopted a monitoring strategy whereby it continues to ensure continued implementation of its standards in all member countries. This is in an effort to ensure that all countries engage in a global war against money laundering by securing all international financial systems. So far, countries such as Sri Lanka and Haiti, which were listed as countries that had ineffective AML strategies, have since been removed from the list after failed efforts to comply with FATF. Currently, two countries still remain on their list of countries considered high-risk in the AML adoption standards. These are Iran and the Democratic People’s Republic of Korea.

AML Application to Cryptocurrency-Based Businesses

Cryptocurrencies have been a topic of mixed reactions in various jurisdictions globally. While some governments have completely banned cryptocurrencies, such as China, others have open heartedly accepted cryptocurrencies as legit methods of payment. However, the cryptocurrency market is not without risk, and of these risks includes money laundering. Therefore, to be able to further the war on money laundering in the U.S. the SEC (Securities and Exchanges Commission), has started a war on rogue cryptocurrencies that are not AML or KYC compliant. Their reason for getting involved, along with fighting money laundering, was to ensure that they protect the interests of investors.

There is no doubt that crypto mania took over in 2017 especially in the last quarter. The surge in prices of major cryptocurrencies saw a rise in demand for crypto-assets from investors who wanted to cash in on this new found investment opportunity. This subsequently led to an increase in the number of users who wanted to use exchange platforms. Facing allegations of regulation from the SEC, most platforms are now trying their best to ensure that they are AML compliant and have initiated KYC procedures on all new customers.


There is no doubt that cryptocurrencies such as Bitcoin have previously been involved in funding major illegal activities. The Silk Road was a prime example of how Bitcoin could be used to facilitate such illegal activities. However, as more cryptocurrency-based businesses are becoming AML and KYC compliant, there lies great hope for the future of cryptocurrencies. If you would like to invest in an AML and KYC compliant crypto-asset, we highly encourage you to check out our gold and blockchain based products, especially our DinarCoin, on our main website.


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