An approach to anti-money laundering compliance for cryptoassets

Key takeaways

• Existing anti-money laundering (AML) approaches relying on trusted intermediaries have limited effectiveness with decentralised record-keeping in permissionless public blockchains.
• The public transaction history on blockchains can enable AML and other compliance efforts, such as FX regulations, by leveraging the provenance and history of any particular unit or balance of a cryptoasset, including stablecoins.
• An AML compliance score based on the likelihood that a particular cryptoasset unit or balance is linked with illicit activity may be referenced at points of contact with the banking system ("off-ramps"), preventing inflows of the proceeds of illicit activity and supporting a culture of "duty of care" among crypto market participants.