Anti Money Laundering In Crypto

What Is AML And How Does It Apply To Crypto?

By SimpleSwap | SimpleSwap Blog | 16 Dec 2022

Crypto investing has an element of risk, mainly due to the lack of official regulation. That’s why cryptocurrency has attracted the attention of criminals who were looking for a way to hide their profits. There are a number of crimes involving crypto out there. Attackers use digital assets to launder illegally obtained funds.

In order to stop this criminal activity the Anti Money Laundering (AML) process was created. It is considered to be one of the most effective methods that can be used not only by companies, but also by ordinary users.

Money laundering is the process of concealing illegal income. Dishonest businesses and individuals have to launder money in order to make the funds look like the source of income was legal. Money laundering consists of three stages, including placement, layering and integration/extraction.

The placement stage consists of transferring the "dirty" money to a legitimate vault, like a cryptocurrency exchange. Layering is the process of mixing illegal funds with legitimate ones, making it difficult for authorities to trace and identify the source of income.

At the integration stage of money laundering, the funds are going back into the criminal’s legitimate financial accounts. Cryptocurrencies are well suited for money laundering schemes as they operate on decentralized networks, making it extremely difficult to trace them. 

Why do we need AML checking for cryptocurrencies?

If digital assets were used in fraudulent transactions, they would be marked so authorities could find criminals. Digital assets that are owned by scammers are called "dirty". In order not to be detected, hackers use special services (mixers) that allow mixing transactions. Sometimes after that such assets end up in wallets of decent users.

If the dirty assets appear on the account of a regular client on an exchange that uses AML verification, then the account will be blocked. The client will be required to provide some data about where these currencies came from. It is most likely that the user will be blacklisted by cryptocurrency exchange and it will be very difficult to prove to be innocent.

Any cryptocurrency can become "dirty" if it was used in illegal actions. Among the most popular types of criminal activity that make cryptocurrency “bad” are:

  • hacker attacks;
  • money laundering activities by converting fiat into cryptocurrency;
  • fraud;
  • buying and selling drugs, covering murders, and other illegal goods or services on the black market.

"Dirty" crypto can be identified even if it did not come to you as a result of fraud, extortion or other illegal transactions. For example, if your cryptocurrency went through a transaction mixer or came from an unregistered cryptocurrency exchange, it is defined as "dirty" by AML services. AML services will help you find out if your cryptocurrency has been involved in illegal activities or not.

How does AML work? 

AML is a set of rules that monitors suspicious activity and stops criminals from laundering dirty money. For example, KYC is a part of the AML system that helps to identify the user. There are also other processes like a Customer Acceptance Policy (CAP), a Customer Identification Program (CIP), ongoing transaction monitoring and risk management procedures. All of these features help to prevent money laundering on crypto exchanges. 

What services can be used to check crypto

You can find several services that allow you to check cryptocurrency transactions for purity by yourself. For example, GetBlock offers such a feature. This service checks addresses and transactions by different criterias. Afterwards, it evaluates risks of the transaction/address, and makes a conclusion about the transfer: it can be trusted, dangerous or suspicious.

There is another service called AMLbot. It can check transactions on its website or in Telegram bot. After registering on the site, the user receives 2 free checks as a gift. It allows you to analyze wallets and transactions by 20 parameters in order to know how high the level of risk is.

Companies can use the Crystal Blockchain services. It has 3 types of subscription. Free is suitable for a small company or foundation. API and PRO are created for large companies, exchanges, payment systems or banking structures.

There is also software for companies that allows them to see whether the cryptocurrency received on the accounts was involved in illegal transactions. For example, Elliptic Vault Limited and Neutrino


Increasing compliance with AML measures could make it harder for crypto projects to develop. Because privacy there is the most important thing. However, a strong regulatory program could bring some benefits. The adoption of cryptocurrency by major financial institutions will help to develop more secure systems for the global economy. It may also attract traditional investors to the crypto market. 

Did you like this article? We have more useful information for you in our blog! Check out our articles about Stop Loss And Take Profit or The Layers Of Blockchain!

The easiest way to buy or exchange coins is to use SimpleSwap services.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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