Anti-Money Laundering (AML)

Money laundering typically happens in three stages. In placement, illegal cash is introduced into the financial system, for example by depositing it in bank accounts. In layering, the money is moved through complex transactions to hide its origin. In integration, the money re-enters the economy appearing legitimate, for example through property purchases or business investments.

AML rules require banks and many other businesses, including accountants, lawyers, estate agents, casinos and cryptocurrency firms, to take steps to detect and prevent money laundering. These include verifying customers' identities through Know Your Customer checks, monitoring transactions for suspicious activity, keeping records, training staff and reporting suspicious activity to the authorities.

For example, a bank might flag a customer who makes many cash deposits just below the threshold that triggers automatic reporting, a pattern called structuring.

International standards are set by the Financial Action Task Force, an intergovernmental body. Failing to comply with AML rules can lead to very large fines for financial institutions, and in serious cases, criminal charges for individuals.