Why money laundering prevention (AML) is important for your security

The importance of combating money laundering becomes clear from the following facts and figures: for example, the AML project Economic and Legal Effectiveness of Anti-Money Laundering (ECOLEF) assumes that up to 100 billion euros are laundered annually in Germany alone. According to estimates by the United Nations Office on Drugs and Crime (UNODC), the damage caused by money laundering amounts to between 800 billion and two trillion US dollars per year worldwide.

For this reason, there are extensive requirements for an anti-money laundering organization within a company. These existing laws are mandatory requirements - in other words, compliance with AML standards is a legal obligation, which in Germany is based on the Money Laundering Act (GwG).

A look at economic history

The USA is considered a pioneer in the fight against money laundering. The Bank Secrecy Act (BSA) was introduced there as early as 1970 to combat money laundering. Further laws gradually followed. To this day, the administrative body responsible for these laws is the Financial Crimes Enforcement Network, which aims to protect the financial system from abuse by criminals, including terrorist financing, money laundering and other illegal activities.

The next milestone followed in 1989 with the founding of the Financial Action Task Force (FATF). Several countries and organizations were involved in this. To this day, the FATF's task is to formulate and implement international guidelines and recommendations to combat money laundering. The International Monetary Fund (IMF) has also taken up the issue of money laundering and the like, as ensuring the stability of the international monetary system is a key concern of the 189 member countries.

Further AML laws enacted

Many countries around the world have enacted important AML laws that must be complied with to enforce the fight against money laundering. These include, among others

• US Patriot Act, Bank Secrecy Act (USA)

• Proceeds of Crime and the Terrorist Financing Act (Canada)

• Anti-Money Laundering and Counter-Terrorism Financing Act of 2006 (Australia)

• EU directives to combat money laundering (EU)

The FATF supports countries in setting up a Financial Intelligence Unit (FIU). In Germany, this is the Central Office for Financial Transaction Investigations. It is responsible for managing the flow of information between its institutions and the enforcement authorities. Legislation and regulations of all FIUs operating worldwide require the financial sector to act as the first line of defense against money laundering and terrorist financing. In addition to AML-compliant standard controls, this naturally also includes an obligation to report illegal activities. But which AML standard does the BSDEX refer to?

Customer due diligence and mandatory reporting - AML in the crypto sector

The BSDEX (Börse Stuttgart Digital Exchange) is based in Germany and is therefore subject to German legislation. This is based on the 5th EU Money Laundering Directive, which came into force at European level on July 9, 2018 and has also been implemented at national level since January 1, 2020 with the Money Laundering Act. This means that crypto exchanges are subject to the same provisions for the prevention of money laundering and terrorist financing as financial institutions. These provisions also include comprehensive customer due diligence and a duty to report suspicious activities.

The advantage of AML for BSDEX customers

And what does all this mean for BSDEX customers? Quite simply, we are a reputable trading venue for digital assets. Above all, this also means that we do everything we can to prevent illegal activities on our trading platform. And this is also in the legitimate interest of our discerning and law-abiding (business) customers, with whom we are very happy to work. Conversely, this also means that criminals do not have an easy time with us, which means that BSDEX customers have greater security.

Solid risk analysis for BSDEX

BSDEX is the trusted partner for all client groups, especially institutional investors, companies and professional private clients. We want our customer relationships to be sustainable and long-lasting because we believe in the future of crypto assets. To achieve this, we rely on AML-compliant processes in the area of digital money laundering prevention, among other things. The recipe for success here lies in the interaction between human auditors and state-of-the-art technologies. This includes software solutions, automation and smart analysis processes in equal measure. Only the use of these technologies helps to effectively identify and combat risks in the area of financial crime. One example of this is anomaly detection, which can quickly detect a pattern in transaction data in the event of illegal activities. This is important as the challenges in the area of money laundering will continue to increase and deterrence against it must be intelligent and effective.