According to UK Finance, in 2023 $22.2 billion was laundered globally using cryptocurrencies, which is a decrease on the 2022 estimate of $31.5 billion. Nowadays, financial authorities worldwide are tightening regulations to prevent any kind of illegal activities, including money laundering and terrorist financing. 

For businesses operating in the digital asset space, implementing Anti-Money Laundering (AML) protocols is essential to maintaining credibility, ensuring security, and fostering trust. This is particularly vital for white-label crypto wallets, which provide companies with a ready-to-use infrastructure for digital asset management. In today’s article, we’ll explore the importance of AML in white-label crypto wallets, how these measures work, and why businesses should prioritize compliance.

What Is Anti-Money Laundering?

Starting from a simple definition, Anti-Money Laundering, or shortly AML, is a set of laws, regulations, and measures designed to prevent illegal funds from being disguised as legitimate financial assets. These regulations require financial institutions and other authorities to monitor their customers’ transactions and report any suspicious activity.

The Financial Action Task Force (FATF) sets global benchmarks for AML regulations. In 2014, it issued guidance on cryptocurrency-related AML measures, prompting swift action from policymakers in FATF member countries. Regulatory bodies such as the United States Financial Crimes Enforcement Network (FinCEN), the European Commission, and numerous others have since incorporated most of FATF’s cryptocurrency AML recommendations into legal frameworks.

Why AML Is Important For White-Label Wallets?

  • Preventing fraud and financial crimes: AML tools help identify and prevent fraud, money laundering, and other financial crimes by authenticating user identities and tracking suspicious transactions.
  • Increased security level: AML framework fosters a secure ecosystem, mitigating risks associated with fraudulent transactions, which helps to boost users trust level.
  • Regulatory compliance: the adoption of AML ensures that businesses operating white-label wallets comply with local and international laws.

How AML Works In White-Label Crypto Wallets?

First of all, here we need to mention know your customer (KYC) verification. KYC is a key part of AML activity. White-label crypto wallets incorporate KYC procedures to verify user identities using government-issued identification documents, biometric authentication, and other methods. This helps prevent criminals from using the wallets for illegal activities.

Secondly, it’s all about monitoring the transactions. AML systems constantly monitor transactions for suspicious patterns, such as large fund transfers, rapid transaction sequences, or interactions with flagged addresses. Some internal tools, like automated alerts, help detect and investigate potential money laundering attempts.

Last but not least, backlists check. In the white-label crypto wallets, integrated AML systems cross-check user details against global watchlists, such as OFAC and FATF, ensuring that wallets are not used by sanctioned individuals or entities involved in financial crimes.

AML is just one of the options for how you can protect your cryptocurrency wallets. Book a meeting with Evercode Lab’s team to learn more about how we can create and develop secure and user-friendly Web3 products just for you!

How Is The AML System Beneficial For The Crypto Wallets?

AML framework within the cryptocurrency wallets is not just a way to protect your customers, it can be beneficial in various ways: 

  • Legal protection: the implementation of AML measures helps businesses reduce their legal exposure and comply with regulations, ensuring smooth transactions in various jurisdictions (again, each country has its own internal regulations).
  • Crypto fraud prevention: AML measures protect businesses from financial fraud, hacking attempts, and illegal activities, safeguarding both users and platform operators.
  • Better reputation point for the brand: a flexible and safe platform attracts financial investors, partners, and a broader user base, enhancing business credibility and market presence, which is a competitive advantage.
  • Lower risks of financial penalties: thanks to AML regulations white-label wallets can minimize the risks of regulations, which usually lead to hefty fines and operational shutdowns for the platforms.
  • Additional revenue stream: the white-label crypto wallet provider can attract additional profit by offering paid AML verification services, so users will be able to check other wallet’s using the advanced screening for additional small charge.

Conclusion

At the end we want to note that AML compliance is no longer just an option in the crypto industry – it’s a must-have tool. White-label crypto wallets must integrate AML protocols to ensure legal compliance, enhance security, and build user trust.

Looking to create a secure and user-friendlycrypto wallet service, which will align with regulatory requirements? Or maybe you dream about the crypto exchange platform? Evercode Lab can help you design and develop any Web3 product, from white-label wallets to telegram mini-apps. Reach out to our team to start creating the platform that empowers your users with simplicity and safety.