What are AML checks and why do individuals and businesses need them?

A few years ago, the author of this article had no idea what AML in cryptocurrencies meant, despite already using crypto for personal purposes. One day, I received a small Bitcoin gift worth a few hundred dollars from a friend and decided to cash out my crypto into fiat. But I faced an unexpected problem: neither centralized exchanges nor physical exchangers wanted to accept my Bitcoin, citing AML checks that labeled the funds as "dirty." Luckily, the amount was small, and I managed to cash it out through alternative methods. But my friend had it worse: the Bitcoins he had sent me were part of his investment portfolio, and an AML check revealed that three out of his four main coins, all purchased from the same crypto exchange, had nearly criminal origins. He had built that portfolio over several years.

In this article, we explain what AML in crypto is, how it works, how it differs from traditional banking AML, and why it’s essential for both everyday users and businesses.

You can check your wallet or your counterparty’s wallet using the BitOK bot — one of the best tools for crypto AML checks.

What is AML?

AML (Anti-Money Laundering) is a broad term. Simply put, AML encompasses everything governments, banks, international regulators like FATF, and other financial institutions do to prevent two things: money laundering and terrorist financing.

What is the Difference Between KYC/KYT and AML?

KYC (Know Your Customer) is a component of AML. Its purpose is to ensure financial institutions know exactly who is using their services and for what reasons. That’s why you’re asked to show your ID, fill out forms, and answer detailed questions.
AML is broader and includes transaction analysis: who sent what, to whom, where, and why.

KYT (Know Your Transaction) refers to tools that analyze the meaning and intent behind crypto transactions in real time.

Isn’t Crypto Supposed to Be Free of Oversight and Annoying KYC Requirements?

Yes and no.

Cryptocurrency gained popularity as a response to the traditional financial system (TradFi), which is often bureaucratic, slow, and unfriendly to users. Anyone who has tried opening a foreign bank account knows the KYC struggle. Creating a crypto wallet is much easier, KYC checks are optional, and making payments is smoother than SWIFT transfers.

At the same time, blockchains were designed to be transparent. Satoshi Nakamoto envisioned Bitcoin wallets as anonymous, but the transactions themselves were always public and analyzable. This allowed people to identify scammers, terrorists, and criminals and avoid dealing with them. Most popular blockchains (except Zcash and Monero) follow the same principle. Users still need to know who they’re dealing with.

Is AML in Crypto the Same as in Banks?

No. Legal requirements for fiat and crypto differ in most countries. Fiat money operates under national laws and FATF/FinCEN rules. Crypto is still more lightly regulated.

However, the core principle remains: funds should be clean. Crypto originating from drug trafficking, gambling, or human trafficking will create problems—not just for the original criminal, but also for anyone who transacts with them.

While centralized exchanges are similar to banks (requiring KYC and source-of-funds checks), crypto AML works differently under the hood. It involves transaction tracing, categorizing wallets by activity type, tracking transaction chains, identifying beneficiaries, and determining transaction purpose. It’s more technologically advanced than traditional AML.

Isn't This Just for Regulators?

Actually, crypto AML is more important for consumers than regulators. Why?

Imagine using a crypto exchanger you found via search or ads. You complete a transaction, but later discover that the exchanger is linked to wallets tied to child exploitation. Law enforcement knew. Now you’re suddenly a person of interest, despite doing nothing wrong.

Or maybe you invest in a new DeFi protocol. The audit looks good, but the protocol is used by North Korean hackers. Again, you’re now in the spotlight.

Who Really Needs Crypto AML?

Individuals:

Counterparty Scam Checks: Whether you're sending funds to a friend, buying something, paying for imports/exports, or moving money abroad—you need to check the wallet.

Portfolio and Asset Cleanliness: If you're building a crypto investment portfolio for long-term gains (houses, cars, stocks), clean assets are a must. Dirty assets mean trouble when converting to fiat.

Avoiding Law Enforcement Trouble: As mentioned earlier, avoid dirty crypto to stay out of trouble.

In short, AML helps individuals keep their assets clean.

Businesses:

Counterparty Risk Mitigation: Accepting crypto in B2B? Make sure you're not unknowingly involved in criminal schemes—check wallets.

Security: Ensure you're sending funds to the correct wallet—not to hackers. Know who you're dealing with.

Compliance: Especially for companies operating in multiple jurisdictions, compliance with MiCA and FATF standards is crucial.

What Should You Do?

Use the BitOK Telegram bot to check counterparties—and yourself. Your wallet might already be flagged as risky.

BitOK uses its own wallet classification, advanced analytics, and top-tier technology. It provides detailed reports for businesses and individuals: scoring, transaction history, source and destination analysis—everything you need to stay safe.

Check your wallets. Avoid dirty crypto. Sleep well.

Get it