Glossary

Anti-Money Laundering (AML)

1 min read

Anti-Money Laundering (AML) is a category of laws and regulations that are intended to prevent money laundering, terrorist financing, tax evasion, and other illicit activities.

Most AML laws place requirements on financial institutions for keeping detailed records of their customers’ transactions and interactions so as to enable authorities to track the financial history of any customer.Additionally, financial institutions must often take a variety of steps to prevent illicit money transfers ahead of time. One such requirement of AML is Know Your Customer (KYC) laws, which require a financial institution to verify the identities of their customers.

Bitcoin brokerages and exchanges which take custody of user funds are subject to AML compliance in order to prevent money from being laundered between Bitcoin and other currencies. However, AML compliance varies significantly across jurisdictions.

Related Terms
Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) is the nation's first and most comprehensive federal anti-money laundering and counter-terrorism financing (AML/CFT) statute.
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Know Your Customer (KYC)
Know Your Customer Laws, Anti-Money Laundering, and Counter-Terrorism Financing Laws are all intended to combat illicit money transfers by mandating that all bank accounts be identifiable to individuals or organizations.
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Brokerage
A brokerage is a financial institution which allows its customers to buy and sell assets directly. Brokerages differ from exchanges in that brokerages serve as the counterparty to its users in all transactions.
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Exchange
An exchange is an institution which acts as a market-maker between parties who wish to buy and those who wish to sell. Exchanges simply facilitate trades between parties for a fee.
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Custodial
A custodial wallet or solution is a method of storing Bitcoin keys through a third party. Instead of controlling one's own keys, a user allows a custodian to hold the keys, trusting that they will allow the user access to their funds in the future.
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