In plain English
What Anti-money laundering means
AML covers the rules and internal controls financial firms use to identify customers, monitor transactions, spot suspicious patterns, and report activity that may involve criminal proceeds. The term is often paired with countering the financing of terrorism, or AML/CFT. FATF standards are the main international reference point for these measures.
Why it matters
AML affects onboarding, payments, trade funding, withdrawal checks, recordkeeping, and whether a firm will freeze or exit an account. It is meant to protect the financial system and support law enforcement, but it can also create delays or extra document requests for legitimate clients.
Example
A broker notices that a client who normally trades small amounts suddenly deposits large sums from several unrelated third-party accounts and quickly requests withdrawals. The firm may pause the activity, ask for source-of-funds documents, file an internal review, and decide whether a suspicious activity report is required under local rules.
Quick answers
Common questions
Is AML only about money laundering?+
No. In many frameworks it also includes counter-terrorist-financing controls, sanctions screening, and related reporting and monitoring obligations.
Does AML compliance mean a firm is safe?+
No. It lowers certain abuse risks, but it does not remove counterparty risk, operational risk, or the possibility of compliance failure.
Sources