What is Anti Money Laundering (AML) Verification in the Crypto Sector?

In the global business landscape, all companies have a responsibility to prevent and stop financial crimes, regardless of their size or sector. It includes crypto businesses, which are not exempt from this obligation. As more money is being transferred online and crypto payments are on the rise, it has become important to have protection against illegal transactions. The primary tool used to safeguard against this is AML verification, which stands for anti-money laundering. 

Why AML Checks are Important

With the development of the crypto industry, many companies pay attention and engage with this sector:

• integrate crypto in their payment systems;
• launch own crypto projects and list tokens on large exchanges (e.g., WhiteBIT listing);
• add trading desks to their crypto-oriented clients;
• invest in digital assets and trade them;
• participate in market making in the crypto market.

Regardless of how they engage in crypto, businesses must adhere to AML standards, just as they would in traditional finance.

AML regulations are a set of rules and standards that ensure that monetary transactions (no matter their size) adhere to local and international laws and are not involved in any illegal activity. That includes money laundering, financing of terrorists, bypassing sanctions, etc.

Like in the traditional market, whenever a business interacts with a new client (an individual or a company), it must initiate a series of AML checks like here: https://whitebit.com/aml-service. It is crucial during customer onboarding to make sure one is not associated with any illegal schemes.

How AML Check Takes Place

Crypto AML checks involve several key steps to ensure compliance and prevent illicit activities:

1. ID check. This step verifies the identity of the individuals engaging in crypto transactions. It involves collecting personal information and comparing it against official documents to confirm the person’s identity is legitimate and accurate.
2. PEP (politically exposed persons) check. This process identifies whether an individual holds a public position or has any significant political influence, which may increase the risk of corruption. PEP checks help in assessing the risk level of transactions involving such individuals.
3. Sanctions lists screening. This involves checking individuals and entities against global sanctions lists to ensure they are not engaged in terrorism, international crime, or other activities that could lead to being sanctioned.
4. Adverse media screening. This check searches for any negative news articles related to an individual or entity. It helps identify potential reputational risks or past involvement in illegal activities, further informing the risk assessment process.

Crypto businesses, especially virtual asset services providers, need to conduct anti-money laundering verification for their clients to protect against the risks associated with money laundering and financial crime.