AUDITOR KPMG SAYS REGULATORS NEED UP-TO-DATE STANDARDS FOR MONEY LAUNDERING IN CRYPTO

Last updated: June 20, 2025, 01:34 | Written by: Changpeng Zhao

The world of cryptocurrency is rapidly evolving, presenting both exciting opportunities and significant challenges for regulators and financial institutions.One of the most pressing challenges is the use of crypto assets for money laundering. To meet regulatory requirements, adapt to the market environment, and comply with audit standards, KPMG has developed a sophisticated tool: The KPMG AML Audit D A Dashboard ( AML for Anti-Money Laundering, D A for Data Analytics ). This tool benefits both regulatory audit clients and advisory clients.As traditional anti-money laundering (AML) tactics prove inadequate in the face of sophisticated crypto schemes, leading auditor KPMG is urging regulators to develop more up-to-date and focused standards. Given the specific nature of money laundering via crypto, KPMG argues that banks can no longer rely on traditional anti-money laundering tactics. KPMG proposes that financial institutions and regulators work together to more effectively combat money laundering, stating: Regulators must develop more up-to-date, focused standards that dealThis call to action comes at a crucial time, with international bodies like the G20 discussing global crypto regulations and the EU implementing a new AML framework.The specific nature of crypto-related money laundering demands a fresh approach, one that leverages innovative technology and fosters collaboration between financial institutions and regulatory bodies. Auditor KPMG Says Regulators Need Up-to-Date Standards for Money Laundering in CryptoThe stakes are high; failing to address this issue effectively could undermine the integrity of the financial system and facilitate illicit activities on a global scale. MSB/MTLs will need to assess consumer and investor standards within a digital payments framework as new know-your-customer (KYC), anti-money laundering (AML), and tax regulations evolve at the international, federal, and state levels for stablecoins.The rise of stablecoins and digital payment systems further complicates the landscape, demanding a comprehensive reassessment of existing KYC and AML protocols.This article explores KPMG's recommendations and the broader implications of this evolving regulatory landscape, offering insights into the necessary steps to combat money laundering in the crypto era.

The Inadequacy of Traditional AML Tactics in the Crypto Space

Traditional anti-money laundering (AML) strategies, built for conventional financial systems, often fall short when dealing with the unique characteristics of cryptocurrency transactions.These systems rely heavily on identifying suspicious patterns in bank transactions, monitoring large cash deposits, and tracking the movement of funds through established financial institutions.However, the decentralized and often pseudonymous nature of cryptocurrencies presents a completely different set of challenges.

Here's why traditional AML tactics are struggling:

Pseudonymity: While not entirely anonymous, crypto transactions are often associated with pseudonymous addresses rather than identifiable individuals or entities, making it difficult to trace the origin and destination of funds.
Decentralization: Cryptocurrencies operate outside the control of central authorities, making it challenging for regulators to monitor and intercept illicit transactions.
Global Reach: Crypto transactions can be conducted across borders with relative ease, making it difficult to enforce national AML regulations.
Technological Complexity: The technology underlying cryptocurrencies is constantly evolving, with new innovations like privacy coins and decentralized exchanges (DEXs) further complicating AML efforts.

For example, a money launderer could use a mixer or tumbler service to obscure the origin of their crypto funds, making it nearly impossible for traditional AML systems to trace the funds back to their illicit source. In fact, KPMG LLP was the first of the Big Four firms to organize itself along the same industry lines as clients. Our Industries Asset Management Banking and Capital Markets Consumer and Retail Energy and Chemicals Financial Services Government Healthcare and Life Sciences Industrial Manufacturing Insurance U.S. International Corridors PrivateThis highlights the need for more sophisticated and crypto-specific AML solutions.

KPMG's Call for Up-To-Date Regulatory Standards

Recognizing the limitations of traditional AML approaches, KPMG is advocating for regulators to develop more tailored and contemporary standards specifically designed to address the challenges of money laundering in the crypto space. The G20 countries discussed the subject of crypto used for money laundering at their meeting in March 2025 with the intent to develop common regulations globally. Cryptocurrencies SwitzerlandAccording to KPMG, a one-size-fits-all approach is no longer sufficient. In July 2025, the new EU anti-money laundering and countering the financing of terrorism (AML/CFT) framework entered into force and the European Anti-Money Laundering Authority (AMLA) was formally established.They emphasize the urgent need for:

Focused Standards: Regulations that directly address the specific techniques and vulnerabilities exploited by money launderers in the crypto ecosystem.
Up-To-Date Standards: Regulations that keep pace with the rapidly evolving technological landscape of cryptocurrencies.
Collaborative Approach: Increased cooperation between financial institutions, regulators, and technology providers to share information and develop effective AML solutions.

The Importance of a Collaborative Approach

KPMG stresses that combating money laundering in crypto requires a collaborative effort.Financial institutions, regulators, and technology providers must work together to share information, develop best practices, and implement effective AML solutions.This collaboration could take several forms:

Information Sharing: Sharing intelligence on suspicious crypto transactions and emerging money laundering trends.
Joint Development of AML Tools: Collaborating on the development of new technologies and strategies for detecting and preventing money laundering in crypto.
Regulatory Sandboxes: Creating controlled environments where financial institutions and technology providers can test new AML solutions and regulatory approaches.

By fostering collaboration, the industry can create a more robust and effective AML framework for the crypto space.

The Role of Technology in Combating Crypto Money Laundering

Technology plays a crucial role in both facilitating and combating money laundering in the crypto space.While criminals can use advanced technologies to obfuscate their transactions, financial institutions and regulators can also leverage technology to detect and prevent illicit activities.

Here are some examples of how technology can be used to combat crypto money laundering:

Blockchain Analytics: Using blockchain analytics tools to trace the flow of funds through the blockchain and identify suspicious transaction patterns.
Artificial Intelligence (AI) and Machine Learning (ML): Employing AI and ML algorithms to analyze large datasets of crypto transactions and identify potential money laundering schemes.
KYC and AML Compliance Software: Implementing KYC and AML compliance software to automate the process of verifying customer identities and monitoring transactions for suspicious activity.

KPMG's AML Audit D A Dashboard

KPMG has developed a sophisticated tool called the KPMG AML Audit D A Dashboard (AML for Anti-Money Laundering, D A for Data Analytics) to help financial institutions meet regulatory requirements, adapt to the market environment, and comply with audit standards.This tool benefits both regulatory audit clients and advisory clients by providing:

Data-Driven Insights: The dashboard provides real-time data and analytics on AML risks and compliance performance.
Automated Monitoring: The tool automates the process of monitoring transactions for suspicious activity and generating alerts.
Reporting and Documentation: The dashboard facilitates the creation of reports and documentation required for regulatory compliance.

This sophisticated tool highlights the importance of leveraging data analytics to combat money laundering effectively.

International Efforts to Regulate Crypto and Combat Money Laundering

The fight against money laundering in crypto is not limited to individual countries or institutions.International bodies like the G20 and the European Union are actively working to develop global standards and regulations to address this issue.

G20 Discussions on Global Crypto Regulations

The G20 countries discussed the use of crypto for money laundering at their meeting in March 2025 with the intent to develop common regulations globally.The goal is to create a consistent and coordinated approach to regulating crypto assets and preventing their use in illicit activities.This includes:

Harmonizing AML Regulations: Aligning AML regulations across different countries to prevent regulatory arbitrage.
Establishing International Standards: Developing common standards for KYC, AML, and other regulatory requirements for crypto assets.
Sharing Information and Intelligence: Enhancing international cooperation in the sharing of information and intelligence related to crypto-related money laundering.

The EU's New AML/CFT Framework and the European Anti-Money Laundering Authority (AMLA)

In July 2025, the new EU anti-money laundering and countering the financing of terrorism (AML/CFT) framework entered into force and the European Anti-Money Laundering Authority (AMLA) was formally established.This framework aims to strengthen the EU's AML regime and address the risks posed by new technologies like cryptocurrencies.The key components of the framework include:

Enhanced Due Diligence Requirements: Strengthening KYC and customer due diligence requirements for crypto asset service providers.
Regulation of Crypto Asset Transfers: Implementing rules to trace and monitor crypto asset transfers, including those involving unhosted wallets.
Increased Powers for AMLA: Giving AMLA the power to supervise crypto asset service providers and enforce AML regulations across the EU.

These international efforts demonstrate the growing recognition of the need for global cooperation in combating money laundering in the crypto space.

The Impact on MSBs/MTLs: Adapting to Evolving Regulations

Money Service Businesses (MSBs) and Money Transmitters (MTLs) are particularly vulnerable to money laundering risks in the crypto space.As new KYC, AML, and tax regulations evolve at the international, federal, and state levels for stablecoins and other digital assets, MSBs/MTLs need to adapt their compliance programs accordingly.

Here are some key considerations for MSBs/MTLs:

Assess Consumer and Investor Standards: Understanding and complying with the evolving regulatory requirements for consumer and investor protection in the digital payments framework.
Implement Robust KYC Procedures: Strengthening KYC procedures to verify customer identities and detect suspicious activity.
Monitor Transactions for Suspicious Activity: Implementing robust transaction monitoring systems to identify and report suspicious transactions.
Stay Up-To-Date on Regulatory Changes: Regularly monitoring and adapting to changes in AML regulations at the international, federal, and state levels.

MSBs/MTLs that fail to adapt to these evolving regulations risk facing significant penalties, including fines, sanctions, and even the revocation of their licenses.

Practical Examples and Actionable Advice

Here are some practical examples and actionable advice for financial institutions and regulators looking to strengthen their AML efforts in the crypto space:

Conduct a Risk Assessment: Conduct a thorough risk assessment to identify the specific money laundering risks associated with crypto assets.
Develop a Crypto-Specific AML Program: Develop a comprehensive AML program that addresses the unique challenges of money laundering in crypto.
Implement Robust KYC Procedures: Implement robust KYC procedures to verify customer identities and detect suspicious activity.
Monitor Transactions for Suspicious Activity: Implement robust transaction monitoring systems to identify and report suspicious transactions.
Train Employees on Crypto AML Risks: Provide employees with regular training on the risks of money laundering in crypto and the latest AML techniques.
Collaborate with Other Institutions: Collaborate with other financial institutions, regulators, and technology providers to share information and best practices.
Invest in Technology: Invest in technology solutions like blockchain analytics tools and AML compliance software to automate and enhance AML efforts.
Engage with Regulators: Engage with regulators to understand the latest regulatory requirements and best practices.

By taking these steps, financial institutions and regulators can significantly reduce the risk of money laundering in the crypto space.

Answering Common Questions About Crypto AML

Here are some common questions related to AML in the cryptocurrency space:

Q: What are the biggest challenges in preventing money laundering in crypto?

A: The pseudonymity of transactions, decentralization of crypto assets, global reach, and rapidly evolving technology are key challenges.

Q: How can blockchain analytics help combat money laundering?

A: Blockchain analytics tools can trace the flow of funds, identify suspicious transaction patterns, and link transactions to known illicit activities.

Q: What is the role of KYC in preventing crypto money laundering?

A: KYC (Know Your Customer) procedures help verify customer identities and prevent criminals from using crypto assets for illicit purposes.Strong KYC measures are crucial for AML compliance.

Q: What is the impact of stablecoins on AML regulations?

A: The growth of stablecoins necessitates a reevaluation of existing KYC/AML protocols to address potential risks related to their use in illicit activities.

Conclusion: The Path Forward for Crypto AML Compliance

The use of cryptocurrencies for money laundering presents a significant challenge to financial institutions and regulators worldwide.As KPMG rightly points out, traditional anti-money laundering tactics are no longer sufficient in the face of sophisticated crypto schemes.The key to effectively combating this threat lies in developing up-to-date, focused regulatory standards, fostering collaboration between industry stakeholders, and leveraging innovative technologies.The establishment of the European Anti-Money Laundering Authority (AMLA) and the ongoing discussions within the G20 highlight the international commitment to addressing this issue.

For financial institutions, this means investing in robust KYC procedures, implementing advanced transaction monitoring systems, and staying abreast of the latest regulatory changes.Tools like the KPMG AML Audit D A Dashboard can be invaluable in streamlining compliance efforts and providing data-driven insights.Ultimately, a proactive and collaborative approach is essential to ensuring the integrity of the financial system and preventing the use of crypto assets for illicit purposes.

Key Takeaways:

Traditional AML tactics are inadequate for the crypto space.
Regulators need to develop up-to-date and focused standards.
Collaboration between financial institutions, regulators, and technology providers is crucial.
Technology plays a vital role in detecting and preventing crypto money laundering.
MSBs/MTLs must adapt to evolving regulations and strengthen their compliance programs.

Take action now to ensure your organization is prepared for the evolving regulatory landscape of the crypto world.Contact KPMG or a similar firm specializing in crypto AML compliance to assess your current risk posture and implement necessary changes.