Anti-money laundering rules exist to stop criminals from turning dirty cash into clean assets. In crypto, that means exchanges and other virtual asset service providers must identify their customers, monitor transactions, and report suspicious activity. The Financial Action Task Force sets the international standard. Individual countries write their own versions. The United States enforces through the DOJ, FinCEN, and state regulators.

Compliance is expensive and imperfect. Binance paid a $4.3 billion fine in 2023 for violating AML rules. The DOJ later filed a civil forfeiture claim seeking $61 million tied to Iranian oil money allegedly laundered through the platform. The exchange said it cooperated with law enforcement and had already off-boarded the accounts involved. The Travel Rule requires exchanges to share sender and beneficiary information on transfers above a threshold. Only about 46 percent of jurisdictions have fully implemented it.

Core AML requirements for crypto businesses

• Customer identification — verify who your users are
• Transaction monitoring — flag unusual patterns
• Suspicious activity reporting — tell authorities when something looks wrong
• Record keeping — maintain data for audits and investigations
• Sanctions screening — block transactions with prohibited parties

Privacy advocates worry about surveillance. Regulators worry about gaps. The debate is not settled.