• Digital Currencies

    Digital currencies are attractive to criminals wanting to launder the proceeds of crime and to finance terrorism.

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Digital Currencies

What are the ML/TF Risks?

Digital currency can mean a digital representation of either virtual currency or e-money and thus is often used interchangeably with the term “virtual currency”.

Decentralised, math-based virtual currencies have attracted increasing attention from an AML/CFT perspective because digital currencies are the wave of the future for payment systems.

Digital currencies may also provide a powerful new tool for criminals, terrorist financiers and other sanctions evaders to move and store illicit funds, out of the reach of law enforcement and other authorities.

  • Convertible virtual currencies can be exchanged for real money or other virtual currencies;
  • A greater potential for anonymity than traditional non-cash payment methods;
  • Being internet based, they are generally characterised by non-face- to-face customer relationships;
  • The potentially to support anonymous funding (cash funding or third-party funding through virtual exchanges if they do not properly identify the funding source); and
  • The potential to support anonymous transfers, if sender and recipient are not adequately identified.

A number of National Risk Assessments have assessed the ML/TF risk of digital currencies as low to medium.  This is primarily due to their lack of widespread use rather than inherent vulnerabilities.

Digital currencies present similar risks to other methods to store value and make payments, although the risks may present themselves differently.

Digital currency providers must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures as a critical first step in complying with AML/CFT laws.

What are the AML/CFT obligations?

In developing responses to obligations under AML/CFT laws and regulations the following steps must be undertaken:

  • Conduct a Money Laundering and Terrorism Financing Risk Assessment;
  • Develop an AML Program that is proportionate to ML/TF Risks;
  • Establish effective Board and Senior Management oversight of the AML/CFT Program;
  • Appoint an AML Compliance Officer;
  • Establish a Customer Due Diligence (CDD) Program including collection and verification of know your customer (KYC) information including Enhanced and Ongoing CDD controls;
  • Implement a ML/TF Risk Awareness Training Program for staff;
  • Implement a monitoring program to identify unusual and possibly suspicious customer activity, transactions and behaviour;
  • Establish a process to report suspicions and other activity specified by AML/CFT law and regulation;
  • Establish Record-keeping controls; and
  • Maintain the ML/TF Risk Assessment and the AML Program as the business and risks change.

How can AML Accelerate help?

AML Accelerate, drawing on unparalleled expertise and real-world experience, has developed an AML/CFT Program Manual for digital currency providers.

Our solutions deliver all the foundational AML/CFT materials including a ML/TF Risk Assessment, an AML/CFT Program, CDD Standards, and an AML Operating Manual, which you can tailor to your specific needs, ensuring your AML/CFT controls are commensurate with your business.

Who has used AML Accelerate in this sector?

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