AML stands for Anti-Money Laundering, and it refers to a set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. AML compliance is essential for protecting the financial system from being misused by bad actors.
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14 Jul 2025
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Vellis Team
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Complying with AML means detecting, preventing, and reporting suspicious financial activity that could indicate money laundering or terrorism financing. From banks and fintech startups to law firms and real estate agencies, a wide range of industries are now required to implement strong AML compliance programs.
This guide walks you through the basics: how it works, why it matters, and what tools and best practices can help.
Anti-Money Laundering compliance is built around the idea that businesses should not unknowingly help criminals “clean” dirty money. Money laundering can fund everything from terrorism to drug trafficking, so governments around the world are serious about stopping it.
AML compliance isn’t just a banking thing. Any organization that moves money or facilitates large transactions is likely to fall under its scope. That includes cryptocurrency exchanges, online lenders, casinos, and even luxury goods dealers.
Regulatory bodies such as the Financial Crimes Enforcement Network (FinCEN) in the U.S., the Financial Action Task Force (FATF) globally, and the EU’s Anti-Money Laundering Directives (AMLDs) play key roles in enforcing these rules. These organizations issue guidelines, conduct audits, and enforce penalties on institutions that don’t comply.
A strong AML compliance program is made up of several interconnected pillars:
Many companies appoint a dedicated AML compliance officer responsible for overseeing these activities. The size and complexity of your compliance program should match the nature of your business and its exposure to financial crime risk.
AML compliance is backed by some heavy-duty legislation. In the U.S., it started with the Bank Secrecy Act (BSA) and has evolved through laws like the USA PATRIOT Act, which expanded the government’s tools to combat terrorism financing.
In Europe, a series of AMLDs (currently on the sixth iteration) sets the baseline for member countries, with additional requirements layered on at the national level. The FATF provides global recommendations that form the basis for AML laws in over 200 jurisdictions.
Violating AML laws can lead to fines, license revocations, and even criminal charges. Just ask some of the world’s largest banks, which have paid billions in penalties over the past decade for poor AML controls.
Here’s what AML compliance looks like day-to-day:
A new customer opens an account, and the system runs KYC checks, verifying their ID and screening them against global watchlists.
If the customer is a politically exposed person (PEP) or linked to high-risk jurisdictions, they are flagged for additional review.
The system watches their account activity for anomalies. For example, frequent wire transfers just under reportable limits might trigger an alert.
Suspicious activity is documented and filed as a Suspicious Activity Report (SAR) with the appropriate authority.
Industries applying AML compliance include traditional banks, cryptocurrency exchanges, online gambling platforms, and even law firms involved in large asset transfers. Frequent red flags include shell companies, excessive cash payments, or rapid movement of funds between unrelated accounts.
As financial transactions go digital, the need for smart, scalable AML solutions is more critical than ever.
The increasing complexity of financial systems has made automation a necessity. These tools enable businesses to monitor thousands of transactions daily without needing an army of analysts. They also support quick escalation and audit-ready reports when needed.
Despite advancements in tech, AML compliance is not without challenges:
One important driver of change in Europe is PSD2 (Revised Payment Services Directive). Knowing what is PSD2 lets you utilize stronger authentication and more transparency in electronic payments. PSD2 also mandates sharing of financial data through APIs, increasing competition and collaboration between banks and fintechs while reinforcing AML compliance standards.
For businesses that handle digital transactions, integrating AML processes into your payment processing solution can streamline operations and reduce risk. Solutions like Vellis, for example, help organizations manage AML, KYC, and fraud detection from one secure dashboard.
It protects businesses from financial crime, regulatory penalties, and reputational damage while building customer trust.
AML is enforced by agencies like FinCEN (US), FCA (UK), FATF, and local regulators, depending on the jurisdiction.
KYC is a component of AML focused on verifying customer identity, while AML covers broader processes like monitoring and reporting.
AML policies should be reviewed annually or whenever regulatory or risk changes occur.
While not always mandatory, AML compliance is increasingly required in sectors like real estate, legal, and high-value goods.
Financial Action Task Force. (2023). International standards on combating money laundering and the financing of terrorism & proliferation: The FATF Recommendations. https://www.fatf-gafi.org/recommendations.html
U.S. Department of the Treasury – Financial Crimes Enforcement Network (FinCEN). (2024). Anti-Money Laundering (AML) program requirements. https://www.fincen.gov/resources/statutes-regulations/aml-program-requirements
European Commission. (2024). Anti-money laundering and countering the financing of terrorism (AML/CFT). https://finance.ec.europa.eu/financial-crime/anti-money-laundering-and-countering-financing-terrorism-amlcft_en
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