In the context of cryptocurrencies, it is a system of rules and tools that help identify and prevent attempts to use digital assets to launder proceeds from crime.
Banks, exchanges, payment platforms and other players are required to check clients, monitor suspicious transactions and, if necessary, report them to regulatory authorities.
What is AML and KYC in the world of cryptocurrencies
AML (Anti-Money Laundering) and KYC (Know Your Customer) are two key mechanisms that ensure security and transparency of operations in the cryptocurrency industry. Their goal is to prevent the use of digital assets for financing terrorism, fraud, and legalization of criminal proceeds.
KYC obliges users to provide personal information (passport, selfie, residential address, etc.) when registering on crypto exchanges or wallets. This allows platforms to verify the client’s identity and reduce risks. AML , in turn, includes procedures for monitoring transactions, identifying suspicious activity, and submitting reports to regulatory authorities.
The implementation of these procedures is especially important in 2025 as global regulation increases. This is especially true as more countries implement mandatory financial controls in the cryptocurrency space.
From a simple transaction to a criminal case: how does it happen?
You can simply transfer bitcoins to a friend – but if it turns out that this address was involved in hacking an exchange or funding shady schemes, your transaction will be under suspicion.
This may be followed by a request from the regulator, blocking of the wallet, freezing of funds. And then – interrogations, lawyers and a criminal case.
Even if you “just translated”, responsibility can come quickly.
Stages of money laundering through cryptocurrency
The laundering scheme in crypto is built approximately like this:
- Placement – criminals deposit dirty money into cryptocurrency. This can be buying bitcoins for cash, through P2P or mixers.
- Layering — the movement begins: tokens are chased through wallets, exchangers, DeFi protocols. The task is to confuse the trail.
- Integration – money is brought back into the economy: purchase of property, transfer to fiat through exchanges, payment for services.
And the higher the level of anonymity, the easier it is to complete all the stages.
What is “dirty crypto” and how does it appear?
“Dirty” cryptocurrency is tokens associated with illegal activities: hacking, drug trafficking, terrorist financing, and so on.
It can fall into the hands of an ordinary user simply through a P2P transaction or even after a transfer from a stranger. Some exchanges automatically block such assets.
The problem is that visually, darknet bitcoin is no different from the honest one.
Practical steps to protect your assets
To avoid getting into trouble:
- Use proven services – exchanges with a reputation and licenses.
- Do not accept transfers from strangers, especially if they are for a large amount.
- Keep transaction history and screenshots of deals.
- When making P2P purchases, check where the coins come from.
- Use AML scanners (e.g. Chainalysis, Coinfirm) – they will show if the coin had a questionable history.
KYC and AML: What’s the Difference and Why Is It Important?
KYC and AML are often confused, although they are not the same thing. KYC ( Know Your Customer ) is the collection and verification of customer data: passport, address, selfie. AML is a system for monitoring suspicious transactions. KYC is part of AML, but not the entire system.
Without KYC, it is impossible to effectively combat money laundering. But KYC itself does not guarantee that no one will use the platform for criminal purposes.
Risks for crypto users: what do you need to know?
If you trade or invest in crypto, you are exposed to risks:
- Blocking funds – if your tokens have a suspicious history, the exchange will simply freeze them.
- Legal liability – even if you didn’t know you were involved in the scheme, you’ll still have to explain yourself.
- Loss of access – some platforms may permanently delete an account if they suspect an AML violation.
- Reputational risks – especially if you work in the industry or are publicly associated with crypto.
Real-life examples of cryptocurrency crime investigations
- Bitfinex (2016) — $4.5 billion worth of bitcoins were stolen. Years later, the criminals were found by tracking a long chain of transfers. Mixers, DeFi, P2P were used.
- Tornado Cash is a mixer that laundered billions of dollars. Its developer is now under investigation.
- Hydra Market — a shadow market that accepted payments in BTC. Liquidated with the participation of Europol.
This shows that the blockchain is transparent, and if they want to, they will find it.
Ignorance is no excuse: legal aspects
More and more often, courts and law enforcement agencies admit that “didn’t know” is not an excuse. If you used “dirty” coins, you have to answer. If you received a transfer from the darknet, you have to explain. And even if you were simply paid in crypto for services, it is important that the source is clean. Especially in countries with active regulation (USA, EU, UK).
How do obfuscation schemes work?
The most popular methods are:
- Mixers are services that mix coins with others to hide the source.
- Chain hopping is a transfer between different blockchains (BTC → ETH → USDT).
- DeFi pools – anonymous exchange without registration.
- P2P – trading directly between people, without the participation of platforms.
Each of these schemes can be used for both legal and money laundering purposes.
AML in action: how is the audit carried out in practice?
When you send or receive a large amount:
- The platform checks the address for blacklists.
- If there are suspicions, he requests the source of funds.
- Sometimes requires documents confirming the origin of the coins.
- In particularly serious cases, it reports to the regulator.
And even if you haven’t broken the law, the process can be unpleasant.
Criticism of AML: Are there any shortcomings to the system?
AML is a necessary thing, but not ideal. Problems:
- Difficulty of compliance – small platforms simply cannot cope legally.
- Errors – “clean” addresses may be blocked.
- Privacy Breach – Sometimes KYC becomes unnecessary and risky for users.
- Limitations on innovation – startups have to spend a lot of money to comply with regulations.
So the system is not perfect, and discussing its boundaries is relevant.
The Future of AML: Trends and Forecasts
Here’s what’s already happening and will likely continue to develop:
- Smart contracts with AML logic – address filtering at the protocol level.
- DeFi regulation – most likely, decentralized platforms will also be required to implement AML.
- Automated behavior analysis is an AI that will identify suspicious patterns based on user activity.
- Mandatory KYC on all exchanges is already a trend, especially in Europe and Asia.
AML will become tougher, and anonymity will become less accessible.
Popular services for conducting AML checks of cryptocurrencies
To ensure AML compliance, crypto companies and projects often use specialized services that allow them to check wallets, addresses, and transactions for risks. These tools help identify connections to the darknet, hacks, scams, and other illegal activities.
Here are some of the leading platforms that are used around the world:
- Chainalysis is one of the leaders in the field of blockchain analytics. The platform offers tools for transaction monitoring, graph construction and risk assessment. It is used by exchanges, banks and governments.
- Elliptic is a service that specializes in detecting illegal flows of funds. It offers an API for analyzing blockchain data and integrating with security systems.
- CipherTrace is a solution from Mastercard that allows you to track transaction chains and find potentially suspicious addresses.
- Crystal Blockchain is an analytics tool from Bitfury with powerful capabilities for chain building and risk classification.
- Scorechain is a European product suitable for companies that work with the EU regulatory framework. It allows you to track customer activity and assess the risk level of each transaction.
Using such solutions allows crypto platforms to operate within the law and increase user trust, especially in the DeFi segment and new crypto projects. In 2025, AML analytics integration is not just a recommendation, but a security standard.
Conclusion
AML is not just a formality. In the world of cryptocurrencies, where every transaction can be tracked, it is important to understand the rules of the game.
Neglecting them means finding yourself in a situation where instead of income you get a block, a trial and stress. If you want to be safe, check your sources of funds, work with legal services and don’t consider anonymity an excuse.
This is a question not only of law, but also of common sense.
