Anti-Money Laundering laws are a series of regulations designed to prevent money being converted from criminal activity to what appear to be legitimate assets.
Anti-money laundering laws actually cover a quite limited number of criminal behaviours and transaction types, such as market manipulation, trade of illegal goods, corruption of public funds and tax evasion, as well as the activities that aim to conceal these deeds. And yet the implications of such laws have been far-reaching for financial institutions and the customers that deal with them.
Anti-money Laundering laws require all financial institutions, or those businesses dealing in financial transactions to complete a set of due-diligence procedures that ensure they aren’t aiding in any money laundering schemes. This has created a web of identity and verification requirements for customers.
The burden of enforcing the AML laws falls to financial institutions that offer customer trading/exchange accounts, and to those that offer credit and loans. These financial institutions are responsible for ensuring that none of their customers are engaged in laundering illegal monies. This means they must verify the origin of large amounts of money, monitor suspicious activities, and report any cash transactions that exceed $10,000 to the appropriate authorities. They are also held responsible for educating their customers regarding AML laws.