How does money laundering actually work? Why does the crypto space need anti-money laundering?

Let’s talk about a topic the financial industry can’t avoid—Anti-Money Laundering (AML).

Money Laundering in Simple Terms

It’s the process of turning dirty money into clean money. Criminals obtain illegal funds through fraud, drug trafficking, terrorist financing, etc., and can’t use the money directly, so they have to find ways to clean it.

This usually happens in three steps:

Placement → Injecting dirty money into the financial system (banks, exchanges, etc.)

Layering → Multiple transfers to obscure the trail; cryptocurrency is a common tool

Integration → Withdrawing the cleaned money for normal use

Why the Crypto Space Gets Targeted

1. Privacy coins are outrageous—Monero (XMR), Tornado (TORN), and similar mixers make transaction records hard to trace, basically a paradise for money laundering
2. Transactions are irreversible—Once crypto is sent, it can’t be retrieved, so recovery is nearly impossible
3. Regulatory vacuum—It used to be the Wild West, and anything went

How Platforms Prevent It

Legitimate exchanges like Gate adopt AML measures such as:

• 🚨 Monitoring abnormal transactions (frequent operations, large deposits/withdrawals)
• 🔒 Account freezing and investigation
• 📋 Identity verification (KYC) to confirm users’ identities
• 🤝 Cooperating with regulators to trace illegal funds

Simply put, AML is about protecting real users’ interests, reducing dirty money in the crypto space, and building more trust.