Anti Money Laundering

Key points

• AML, short for anti-money laundering, brings together legal rules and procedures aimed at detecting and containing funds originating from illicit activities.
• Financial institutions and virtual asset service providers apply AML through customer identification, transaction monitoring, and reporting of suspicious operations.
• In Brazil, the framework combines Law 9,613/98, the work of Coaf, and specific rules from the Central Bank of Brazil for the crypto sector.

What is AML?

AML, an acronym for anti-money laundering, is the set of legal and regulatory procedures aimed at minimizing and curbing the flow of funds generated by illegal activities or of dubious origin. The goal is to prevent proceeds obtained from crimes from entering the financial system disguised as legitimate.

How it works

An AML program relies on a few complementary layers. The first is customer identification, known as KYC (know your customer), which verifies who the counterparty is before enabling operations. The second is continuous transaction monitoring, which looks for atypical patterns, such as splitting amounts or movements inconsistent with the declared profile.

When something stands out, the institution records it and, if warranted, reports the operation to the competent authorities. In Brazil, this reporting goes to the Council for Financial Activities Control, known as Coaf. In addition, companies maintain customer risk analysis, sanctions lists, and screening for politically exposed persons.

In the crypto world, blockchain traceability adds on-chain analysis tools, which follow the path of assets between addresses. These tools complement, but do not replace, identity controls at crypto on-ramps and off-ramps.

A concept related to this topic is the so-called travel rule, an international recommendation requiring the sharing of sender and recipient data in transfers above a certain threshold between regulated institutions. Adoption varies by jurisdiction and is being gradually incorporated into the Brazilian framework.

Why it matters

For companies operating with virtual assets, AML is a licensing requirement and a condition for access to banking partners, not an optional item. For the user, it explains why converting crypto to reais through a crypto off-ramp requires identity verification. Compliance reduces the risk of blocks and sustains the relationship with banks and regulators.

Regulation in Brazil

The legal basis is Law 9,613/98, which criminalizes money laundering and creates Coaf as the financial intelligence unit. With the Legal Framework for Virtual Assets, Law 14,478/22, virtual asset service providers became part of this regime, under the supervision of the Central Bank of Brazil. In practice, KYC policies, monitoring, and reporting of suspicious operations are required.