Anti-Money Laundering (AML)

Definition

Anti-Money Laundering (AML) is the umbrella term for the legal, organisational and technological framework that obligated entities - banks, payment institutions, crypto-asset service providers, real-estate professionals, accountants, lawyers - must implement to prevent the financial system from being used to launder criminal proceeds or finance terrorism.

AML is typically paired with Counter-Financing of Terrorism (CFT), giving the more complete acronym AML/CFT. In the EU, the framework is enacted through successive anti-money-laundering directives (AMLD4, AMLD5, AMLD6) and, from 2027, the new single AML Regulation and AMLA authority.

What an AML programme looks like

Regulators do not prescribe a single technical implementation; instead, they expect a risk-based programme built around five operational pillars:

• Customer due diligence - KYC, KYB, beneficial-ownership identification.
• Ongoing monitoring - transaction monitoring, behavioural analytics, alert review.
• Suspicious activity reporting - filing SARs and, for market abuse, STORs.
• Sanctions and embargo controls - daily sanctions screening of customers and counterparties.
• Governance and training - a designated MLRO, board reporting and recurring staff training.

Regulatory anchor

The global standard-setter is the Financial Action Task Force (FATF), whose 40 Recommendations are transposed into local law. Key European instruments include AMLD4/5/6, the EU Travel Rule Regulation 2023/1113, and MiCA for crypto-asset issuers and service providers. National examples include the BSA in the United States, the MLR 2017 in the United Kingdom, the GwG in Germany and the Code monétaire et financier in France.

Common controls and red flags