I’m a Crypto Startup With a Newly Written AML Policy. Now What?

January 16, 2024
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Preparing Your AML Policy (if you haven’t already) for Your Crypto Startup

Getting Down to Business

As a crypto startup, you’ve likely gone through a checklist of necessary steps before you even begin operations. These may have included incorporating your business and registering with FinCEN, as well as engaging in conversations about anti-money laundering (AML) policies with advisors and compliance experts. This proactive approach is crucial because your written AML compliance program must be in place from day one of operation, prior to onboarding your first customer. (If you need help writing that initial AML policy, BitAML is here to help).

Having navigated the initial steps of setting up your crypto startup, including the critical task of establishing your AML compliance framework, you’re now at a pivotal juncture. This is where the strategic development of your AML compliance playbook comes into play. It’s not just about having a static document that meets regulatory requirements; rather, it’s about crafting a dynamic, living document that evolves with your business and the ever-changing landscape of the crypto world.

Your AML policy is the guiding force behind your daily operations, ensuring not only adherence to regulatory standards but also safeguarding the integrity of your transactions and customer relationships. In the following section, we will delve into the specifics of what makes an effective AML compliance strategy, discussing the essential elements that need to be addressed and how to implement them in a way that aligns with your startup’s unique characteristics and business model.

Crafting a Dynamic AML Compliance Playbook

Your written AML policy should be more than just a static document; it needs to be a living guide that evolves with your business and the crypto world. This compliance playbook will be your guide to daily operations, ensuring legal compliance and protecting your business’s integrity.

From Decoding KYC to Staying Alert with SARs for Robust AML Compliance

Two Key Components of Your AML Strategy

Your AML strategy hinges on two pivotal components: Know Your Customer (KYC) for verifying customer identities and preventing fraud, and Suspicious Activity Reports (SARs) for reporting unusual or suspicious activities to maintain financial integrity.

Know Your Customer (KYC)

In the realm of crypto startups, the Know Your Customer (KYC) process is not just a regulatory requirement, but a critical component of your risk management strategy. You’re required to collect specific information from your customers, generally either prior to or at the time of transaction. This process is critical in identifying and verifying who you are doing business with. This crucial step involves collecting and verifying specific information from your customers before engaging in any transactions. 

The KYC process is designed to help prevent, detect, and deter potential identity theft, financial fraud, money laundering, and terrorist financing. It entails obtaining reliable identification documents, proof of address, and other relevant information that can establish a customer’s identity and profile with your institution.

For a crypto startup, implementing an effective KYC protocol means more than just ticking regulatory boxes. It’s about building a foundation of trust with your users, ensuring that your platform is not misused for illicit activities, and protecting the integrity of the financial system at large. By rigorously vetting who you do business with, you minimize the risk of legal complications, enhance your company’s reputation, and create a safer environment for legitimate customers.

Suspicious Activity Reports (SARs)

As a crypto startup, vigilance against illicit financial activities is not just a regulatory duty but a cornerstone of ethical operations. This is where Suspicious Activity Reports (SARs) come into play. You are obligated to monitor and report any customers or activities that appear suspicious and/or unusual. This requirement involves understanding the nuances of what constitutes these types of behaviors, which can range from large, unexplained transactions, sudden changes in account activity, transactions structured to avoid reporting thresholds, to less obvious signs like reluctance to provide identification information. 

Reporting these activities through SARs is a vital part of your commitment to combating financial crime. It involves detailed documentation of the underlying activity, including the nature of the transactions, parties involved, and why it was deemed suspicious.

Filing SARs is not about making an accusation; it’s about alerting regulators and law enforcement to activities that may require investigation. By doing so, you play an integral role in the broader efforts to maintain the integrity of financial systems and protect against money laundering, fraud, and terrorist financing. Your vigilance and proactive stance in identifying and reporting suspicious activities not only keep your platform compliant but also contributes to a safer and more transparent financial ecosystem.

Fine-tuning Your AML Compliance Playbook

Completing the creation of your written AML policy marks a significant step in your crypto startup journey. However, it’s vital to recognize that this program is far more than a mere document; it’s a dynamic, living playbook that guides your ongoing compliance journey. Your AML playbook is the blueprint for how your business will actively and reactively adhere to anti-money laundering regulations. It outlines your strategies for monitoring, reporting, and preventing money laundering activities within your institution.

This playbook encompasses a range of key components, each playing a crucial role in your overall compliance framework. These include detailed procedures for customer due diligence, transaction monitoring, reporting mechanisms for suspicious and/or unusual activities, and protocols for mandatory record-keeping and data management. It also sets out the responsibilities of your compliance officer and staff training programs to ensure that your team is well-equipped to implement these and other AML compliance obligations.

Moreover, your AML compliance playbook is not static. It should be regularly reviewed and updated to reflect changes in regulatory requirements, emerging risks or typologies, and the evolving nature of your business operations (e.g., new markets, additional products/services). This dynamic approach ensures that your compliance strategies remain effective and relevant, safeguarding your business against the ever-changing landscape of financial crime in the crypto space. By meticulously fine-tuning your AML compliance playbook, you ensure a robust defense against money laundering risks and position your startup for long-term success in the ever-evolving crypto industry.

Crypto Startup AML Policy

Implementing Your AML Compliance Policy – A Continuous Journey of Vigilance and Adaptation

Implementing an AML policy is crucial for your crypto startup, elevating it from mere compliance to a key component of your daily operations. This policy, which should be a living document, outlines the proactive steps to prevent, detect, and report money laundering activities.

It’s essential that these measures are actively practiced and understood throughout your organization, involving regular staff training on AML compliance, current financial crime trends, and the regulatory environment.

Your AML policy must be dynamic, evolving with the rapidly changing crypto market and its associated risks and regulations. Regular reviews and updates of your AML policies are vital to remain compliant and responsive to new challenges. Include a framework for internal audits and reviews to identify and address gaps in your compliance strategy. Encourage feedback from your team, customers, and experts to refine your AML approach continually.

In short, successful AML compliance relies on integrating these strategies into every aspect of your business, adapting to the crypto market’s pace, and committing to continuous education and improvement. This approach lays the groundwork for the long-term success and integrity of your startup in the dynamic cryptocurrency landscape.

Transaction Monitoring – A Key Pillar of AML Compliance

Transaction monitoring, essential in anti-money laundering efforts, combines programmatic and observational methods to identify suspicious activities. Programmatic monitoring uses objective criteria, such as unexpectedly large, frequent, or out of pattern transactions, to flag anomalies, while observational inferences provide context through your compliance team’s expertise. This blend of quantitative and qualitative analysis ensures thorough scrutiny of customer and transaction activities for potential risks. Regular updates and reviews of your monitoring criteria and methods are crucial to adapt to evolving financial landscapes and maintain compliance with the latest AML regulations.

On the Discipline of Record Keeping

AML regulations require you to keep all customer and transaction records for at least five years. These records must not only be maintained but also be well-cataloged and easily accessible. Effective record keeping is a cornerstone of robust AML compliance. As a crypto startup, it’s imperative to understand that AML regulations mandate the retention of any and all customer and transaction records for a minimum of five years. However, this requirement extends beyond mere storage.

It’s essential that these records are meticulously organized and readily available. This means implementing a system that not only securely archives data but also allows for quick retrieval when needed. This could involve digital storage solutions that are both secure and searchable, ensuring that you can promptly respond to any law enforcement or regulatory inquiries.

Efficient recordkeeping not only ensures compliance with AML regulations but also serves as a critical tool for internal monitoring and analysis. By maintaining detailed and accessible records, your startup can more effectively track and analyze transaction patterns, identify potential risks, and make informed decisions to safeguard your operations against money laundering activities. In essence, diligent record keeping is not just a regulatory obligation but a strategic asset for your business, enhancing both compliance and operational efficiency.

Maintaining and Updating Your AML Policy

Ongoing Evolution of Your AML Strategy

The task of maintaining and updating your AML policy is a continuous commitment, essential for ensuring your business’s compliance and integrity. This isn’t just about periodic updates; it’s an ongoing process of evaluation and adaptation to align with the ever-changing regulatory environment, market trends, and shifts in your business operations. It’s required that crypto financial institutions  conduct thorough reviews and make necessary updates at least annually, or more frequently in response to significant changes in your business model, such as introducing new products or expanding into new markets.

The Role of a Specialist Partner in AML Compliance

In the fast-evolving world of cryptocurrency, keeping your AML policy current and effective is a complex task that benefits greatly from the insights and expertise of a specialized partner. A partner with AML compliance expertise is invaluable in helping you navigate the maze of regulatory changes and emerging risks. They provide crucial insights into compliance trends and regulatory requirements, ensuring your AML strategy remains both contemporary and robust.

Regular, independent AML reviews, facilitated by a trusted (and independent) partner in AML, are vital. These reviews provide an objective assessment of your compliance program, pinpointing areas needing improvement and confirming alignment with the latest regulatory expectations and compliance best practices. 

Cultivating a Compliance Culture in Your Crypto Startup

A proficient AML partner can help foster a culture of compliance within your organization. They assist in ingraining the significance of AML practices, not merely as a regulatory obligation but as an integral part of ethical business conduct. This partnership encourages a proactive stance towards AML compliance, equipping your policies to be anticipatory in managing potential money laundering risks.


Ultimately, the journey of maintaining and updating your AML policy is a combination of internal vigilance and external expertise. Collaborating with a specialized AML firm offers the necessary support and guidance for successfully navigating this path, keeping your crypto startup compliant, adaptive, and reputable in a rapidly evolving industry.

With this sustained attention and proactive approach, you can effectively manage the complexities of AML compliance, ensuring your business’s sustainable future in the dynamic world of cryptocurrency.

Next Steps

If your business is already up and running, or if you’re just starting, BitAML can provide the expertise and guidance needed to navigate the complex world of compliance. With a deep understanding of AML, our team is well-equipped to help you stay ahead of the curve and ensure that your project remains compliant and secure. Contact us today to learn more about how BitAML can support your AML polices and compliance efforts.

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