Even Mature Programs Have Blind Spots
One of the biggest misconceptions in crypto compliance is that AML gaps only exist at early-stage startups. In reality, some of the most persistent red flags show up at firms with established programs, dedicated compliance teams, and years of operational history.
Examiners today are far less understanding or forgiving of the phrase “we didn’t know.” Expectations have matured, guidance has accumulated, and regulators increasingly expect crypto money services businesses (MSBs) to demonstrate not just policies—but results.
This post highlights the most common AML blind spots we continue to see in the field, and more importantly, how to fix them before an examiner flags them for you (what you don’t want).
Incomplete or Inconsistent Customer Profiles
Customer due diligence is the foundation of any AML program—and yet it’s still one of the most frequent problem areas.
Common gaps include:
- Missing or vague occupation details
- Incomplete source-of-funds or source of wealth explanations
- No clear statement of account purpose
- No baseline understanding of the customer’s anticipated activity (to measure against actual activity)
On their own, these may seem minor. In practice, they could undermine your entire risk-rating framework. Without complete customer context, transaction behavior can’t be meaningfully assessed, and alerts lose their analytical grounding. In short, it’s much more difficult to determine if something is suspicious or unusual without knowing and understanding the customer.
Examiners don’t just check whether fields exist—they look for consistency, plausibility, and alignment between the customer profile and observed activity. If a customer is labeled “low risk” but their activity suggests otherwise, the absence of detailed onboarding data becomes a material finding.
How to fix it:
Audit your onboarding records against your own risk methodology. If risk ratings rely on customer attributes, those attributes must be present, current, relevant, and reviewed periodically throughout the customer relationship—not just at account opening.
Transaction Monitoring Rules That Don’t Match Your Business Model
Another common issue is transaction monitoring that looks fine on paper—but doesn’t reflect how the business actually operates.
We frequently see:
- Alert criteria copied from legacy fintech or banking templates
- Rules that generate excessive false positives
- Irrelevant alert routines and/or the absence of relevant routines
- Other scenarios that rarely trigger at all
The result is a monitoring system that either overwhelms analysts or quietly misses meaningful risk.
Examiners increasingly ask why specific alerts exist and how they were tested. A lack of documented tuning, periodic review, or scenario validation often signals that monitoring hasn’t evolved alongside the business.
How to fix it:
Revisit your monitoring scenarios through the lens of your current products/services, customer base, geographic footprint, and transaction flows. Document why each rule exists, how it’s calibrated, and when it was last reviewed. Monitoring is not a “set it and forget it” function. Your company grows and evolves, marketplace dynamics shift, and (let’s face it) the bad guys are constantly honing their craft.
Inadequate Sanctions Screening Controls
Sanctions compliance remains one of the fastest-moving risk areas—and one of the easiest to underestimate.
Common gaps include:
- Delayed updates to sanctions lists maintained by OFAC
- Overreliance on IP-based controls without accounting for VPN masking
- Wallet screening that isn’t integrated with transaction monitoring
- Name screening processes that lack fuzzy matching or escalation logic
Crypto firms often assume sanctions risk is binary: either a wallet is sanctioned or it isn’t. In reality, exposure often shows up through indirect interaction, passthrough activity, or incomplete screening logic.
How to fix it:
Ensure sanctions screening is layered—names, wallets, IPs, and counterparties—and updated continuously. Just as important, confirm alerts are reviewed by trained analysts who understand crypto-specific sanctions typologies.
Missing Structuring and Layering Patterns
Structuring and layering don’t always look dramatic in crypto. Often, they appear as small, repetitive behaviors that only become meaningful when viewed holistically.
Examples include:
- Repeated small-value transmittals just below government or internal thresholds
- Multiple accounts funneling funds into a single wallet
- Rapid pass-through activity with no clear economic purpose
When transaction monitoring focuses too narrowly on single events, these patterns can slip through.
Examiners increasingly expect firms to identify behavioral patterns over time, not just isolated transactions. Failure to do so often results in findings related to ineffective monitoring or insufficient investigation depth.
How to fix it:
Incorporate aggregation logic into your monitoring framework. Alerts should consider frequency, velocity, and relationships between accounts—not just transaction size.
Weak SAR Narratives That Don’t Tell the Story
Even when firms detect suspicious activity correctly, many fall short at the reporting stage.
Common issues include:
- Generic, templated narratives
- Little explanation of why activity is suspicious
- Missing links between customer profile, transaction behavior, and risk indicators
A SAR is not a data dump—it’s an analysis. Regulators and law enforcement rely on narratives to understand context, intent, and potential harm.
Poor narratives don’t just reduce usefulness; they can raise questions about whether meaningful analysis occurred at all.
How to fix it:
Train analysts to write narratives that explain the story: who the customer is, what happened, why it matters, and how it occurred. Clear reasoning builds credibility.
How Crypto MSBs Can Close These Gaps Quickly
The good news: most of these issues are fixable without rebuilding your entire AML program.
High-impact steps include:
- Cleaning up customer documentation and refreshing stale profiles
- Reviewing and tuning transaction monitoring scenarios
- Updating sanctions screening workflows and escalation paths
- Refreshing analyst training with crypto-specific typologies
- Strengthening vendor oversight and tool governance
- Aligning your risk assessment with how the business actually operates
The goal isn’t perfection—it’s defensibility. Examiners want to see that risks are understood, monitored, and addressed deliberately.
Final Advice from BitAML
AML isn’t about catching every bad transaction in isolation. It’s about recognizing patterns, understanding behavior, and demonstrating control.
The firms that perform best in examinations aren’t the ones with the thickest manuals—they’re the ones that show awareness, adaptability, and analytical rigor.
At BitAML, we help crypto MSBs identify these blind spots early and strengthen programs before regulators start asking uncomfortable questions. Book a discovery call with BitAML today and to start off the new year with sure footing!