Prevention of money laundering (AML) is a comprehensive term for laws and regulations enacted to prevent criminals from illegally making money or carrying illegal funds. While many illegal activities are targeted by AML laws, some of the most important are market manipulation through methods such as tax evasion, public corruption, and market manipulation.
Many government agencies play a role in determining AML requirements. In the United States, agencies such as the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) allow futures brokers to set AML standards, such as general information and resources for broker dealers.
Money laundering investigations by police and other legal forces often involve examination of financial records for inconsistencies or suspicious activities. In today’s regulatory environment, comprehensive records are kept on almost every major financial transaction. When the police commit a crime, they prefer to use a few methods that are useful to them, rather than access the financial records of the criminals.
In cases of robbery, embezzlement or theft, legal forces can often return funds or property uncovered during a money laundering investigation to victims of crime. For example, if an agency finds the money from a criminal responsible for embezzling it, it can access the financial history of all the people who made these transactions.
Known as” KYC “(Know Your Customer) is a standard form in the investment industry that allows investment advisers to have detailed knowledge of their clients ‘ risk tolerance, investment knowledge and financial status. KYC forms provide protection for both clients and investment advisers. Clients are protected by the fact that their investment advisors know the investments best suited to their personal situation. Investment advisers are under protection because they know what they can and cannot add to their clients ‘ portfolio.
The difference between AML (Anti Money Laundering) and KYC (Know Your Customer) is that in banking KYC is the process that institutions must take to verify their customers ‘ identities before serving. AML operates at a much broader level and is the measures that institutions take to prevent and combat money laundering, terrorism financing and other financial crimes. Banks use AML / KYC compliance to protect secure financial institutions.
AML is also related to the cryptocurrency domain. Many cryptocurrency exchanges have made concerted efforts to comply with money laundering laws as financial institutions have begun to focus more on the cryptocurrency market. Nevertheless, there are some incompatible points against KYC and AML requirements within the crypto domain. That’s because critics argue that such transactions reduce their privacy and invalidate the benefits of centrality by placing sensitive data in centralised personal databases. However, the parties argue that solutions can still be developed that meet legal requirements while ensuring user privacy.
