Panelist, “Update on AML & Sanctions Programs in a World that Contains Cryptocurrencies,” Securities Industry and Financial Markets Association (“SIFMA”) Annual AML & FCC Conference, May 2022

The presentation examines how anti-money laundering (AML) and sanctions compliance frameworks are evolving in response to the growth of cryptocurrencies and digital assets.

While virtual assets are often associated with illicit finance, the discussion emphasizes that blockchain’s transparency, immutability, and traceability can make cryptocurrency a relatively poor vehicle for large-scale money laundering or sanctions evasion. The concept of “Know Your Exchange” (KYE) and the use of blockchain analytics are central themes, highlighting how transactions can often be traced with high probability and linked to identifiable actors, even years later.

Regulators are increasingly expecting financial institutions and virtual asset service providers (VASPs) to integrate blockchain analytics into traditional compliance programs. This includes augmenting KYC procedures, conducting on-chain transaction monitoring, screening for sanctions exposure, and identifying typologies such as mixer usage, darknet market activity, ransomware links, or high-risk jurisdictions. Recent enforcement actions and guidance from agencies such as FinCEN, the SEC, DOJ, OCC, and NYDFS demonstrate a “regulation by enforcement” environment in which compliance expectations are rising rapidly.

Overall, the session underscores that crypto-related risk is less about anonymity and more about governance, controls, and exposure management. Traditional AML and sanctions programs are being adapted—not replaced—to address digital asset threats, requiring firms to understand both their direct and indirect crypto exposure and to implement risk-based controls tailored to the unique characteristics of blockchain-based transactions.