Layer-2 scaling solutions and AML compliance challenges

Money laundering is no longer a back-office problem; it’s a strategic risk that can erode trust, interrupt business, and trigger heavy fines. Realities to watch in 2025: 🔹 AI is reshaping transaction monitoring 🔹 Sanctions/PEP screening is moving to near real-time 🔹 Crypto & DeFi present distinct new vulnerabilities If you haven’t already, treat AML as a board-level priority: adopt risk-based CDD, validate AI models, enable continuous screening, and bake crypto analytics into your controls. Early adopters reduce false positives, speed investigations, and earn regulatory trust while laggards face escalating exposure. We’ve unpacked these insights in detail in our latest blog, including frameworks, charts, and a practical checklist. 🔗 Read here: https://lnkd.in/dFPrbxKQ #AML #Compliance #FinancialCrime #RegTech #AIinAML #CryptoCompliance #SanctionsScreening #RiskManagement #UAE #KYC

As blockchain-based identity systems gain traction, regulators, auditors, and legal advisors must rethink the architecture of compliance. The future may not be about checking documents—it may be about verifying cryptographic proofs. For compliance professionals, Decentralized Identity (DID) offers a radical shift in how we approach Know Your Customer (KYC), Anti-Money Laundering (AML), and cross-border onboarding: https://lnkd.in/e5mT574e

Over the past few days, I’ve had the chance to share how we’re advancing the use of AI in digital asset investigations and compliance, from on-chain analytics to real-time API screening. This final segment dives into how intelligent automation can streamline AML screening across thousands of wallet addresses, helping teams detect risks faster and with greater precision. As someone focused on the intersection of AI, compliance, and blockchain forensics, I’m continuously inspired by how these technologies are redefining what’s possible in digital asset oversight. If you’re building or researching in this space, or simply interested in where AI is taking the next generation of blockchain intelligence, let’s connect.

FATF 2025: Digital Assets and the Stablecoin Paradox I was recently reviewing notes from the FATF Virtual Asset Contact Group (VACG) meeting held in Paris earlier this year (April 2025), and one theme stood out: the same features that make digital assets — especially stablecoins — efficient and attractive are also reshaping the financial crime landscape. Stablecoins are no longer just “digital dollars.” They’ve become a major channel for value transfer, and increasingly, for illicit finance. FATF discussions focused on how to close the regulatory and technical gaps that allow misuse to scale. Key takeaways from the FATF discussions: • Good design doesn’t mean good compliance – even if a stablecoin is well-built from a technical or economic standpoint, that doesn’t mean it meets AML or regulatory expectations. Centralized stablecoins like USDC or USDT are issued by identifiable entities that can freeze wallets, block transactions, and cooperate with law enforcement. In contrast, decentralized stablecoins such as DAI or USDH operate entirely through smart contracts with no central control — meaning there’s no one to enforce sanctions, monitor suspicious activity, or reverse illicit transactions. Strong technology and price stability don’t automatically equal compliance — and that gap is where financial crime risk grows. • The real risk sits in the code – controls need to be built directly into the smart contract, not just handled by the company that issues or trades the asset. • AI helps both sides – regulators and investigators are using AI to track illicit flows, but criminals are also using AI tools to create new types of scams and hacks. • Regulation needs to start earlier – FATF members are considering whether stablecoin code itself should be reviewed or approved before being released, similar to how financial audits work. For financial institutions, these discussions signal what’s coming next. As stablecoins and other digital assets move further into the mainstream, regulators are shifting their focus from who moves the money to how the technology itself operates. This means that compliance expectations will increasingly extend beyond customer due diligence and transaction monitoring — toward understanding the code, governance, and design of the assets being handled. For banks and service providers, staying ahead will require closer collaboration between compliance, technology, and risk teams — and a mindset that treats code as part of the control environment, not just infrastructure. It’s fascinating to see how the definition of compliance continues to evolve alongside technology — and how quickly our approach must evolve with it. https://lnkd.in/ganEAUCi

The Bank Secrecy Act was designed for paper money in 1970. Digital criminals aren't using paper. The gap is enormous. Coinbase just told the Treasury Department something we all know. Current AML rules are broken. They're asking for something revolutionary: 🤖 AI-powered compliance tools 📊 Blockchain analytics for real detection 🔐 Zero-knowledge proofs for privacy 🆔 Decentralized identity verification Here's the reality check. Financial institutions file 25 million reports annually to FinCEN. Most document lawful activity that gets ignored. Meanwhile, compliance costs keep rising. Smaller providers get squeezed out. Customers pay higher fees. The privacy issue is huge too. Americans complete redundant KYC checks for every account. This creates data honeypots that criminals love to target. Coinbase's Chief Legal Officer Paul Grewal nailed it: "When bad guys innovate in financial crime, good guys need innovation to keep pace." The U.S. Secret Service already uses these digital tools for major criminal seizures. The tech works. We just need regulators to catch up. Regulatory sandboxes could let firms test new compliance approaches safely. Smart contracts could automate suspicious activity detection. The choice is clear. Stick with 1970s rules for 2025 crimes. Or embrace technology that actually works. What do you think? Should regulators prioritize innovation or stick with traditional enforcement? #AML #Blockchain #FinTech 𝗦𝗼𝘂𝗿𝗰𝗲꞉ https://lnkd.in/gkjak-i2

Over the past few months, I’ve been dedicating my time to deeply exploring the evolving world of compliance, with a focus on how regulation, technology, and ethics come together to shape sustainable financial systems. My research and discussions have covered a wide range of topics, including: • Strengthening AML/CFT frameworks to combat financial crime effectively. • Understanding KYC and customer due diligence processes in digital finance. • The role of RegTech and automation in improving compliance monitoring and reporting. • The impact of global sanctions, FATF recommendations, and cross-border regulations. • Data privacy, cybersecurity, and their growing intersection with compliance. • Building ethical cultures and integrity-driven decision-making within organizations. • Compliance challenges and opportunities within the crypto and virtual assets sector. This journey has shown me that compliance is far more than just adhering to rules — it’s about trust, transparency, and accountability. It’s about ensuring businesses operate responsibly while enabling innovation and growth. Share your thoughts with me! 📢 #Compliance #AML #CFT #RegTech #CryptoCompliance

Zero-Knowledge Proofs: Privacy Without Compromise Imagine proving something is true without revealing any details. That’s the power of zero-knowledge proofs (ZKPs), a cryptographic tool that’s transforming compliance and payments. With ZKPs, a user can prove they have sufficient funds for a transaction without showing their exact balance. Financial institutions can verify KYC or AML requirements without exposing sensitive personal or financial data. Why it matters: Enhanced Privacy: Validate information without revealing sensitive details. Regulatory Compliance: Meet KYC/AML standards without unnecessary data exposure. Reduced Fraud: Securely verify identities and transactions. Operational Efficiency: Streamline processes while reducing storage and computation needs. While implementation can be complex and resource-intensive, ZKPs offer a glimpse into a future where privacy and security coexist seamlessly in financial systems. Follow FINAP for weekly TechByte content! Visit finapworldwide.com #TechByte #ZeroKnowledgeProofs #PrivacyTech #FINAP

Synthetic identities. Stablecoin laundering. Regulatory asymmetry. This new Toralya insight reveals how deepfake KYC and cross-jurisdictional gaps are redefining the next frontier of AML and financial forensics.

🚨 5 Key AML Trends Every Compliance Professional Must Watch in 2025 🚨 The financial crime landscape is evolving rapidly. Staying ahead requires awareness of upcoming trends and regulatory shifts. Here are the Top 5 AML Trends shaping 2025: 1️⃣ AI & Machine Learning in Transaction Monitoring Automation is enhancing detection accuracy, reducing false positives, and enabling real-time surveillance. 2️⃣ Rise of Digital Assets & Crypto Regulations As crypto adoption grows, regulators are introducing new frameworks to address compliance gaps. 3️⃣ Stronger Focus on Beneficial Ownership Transparency Stricter requirements for centralized ownership registries are being enforced to curb opacity in financial structures. 4️⃣ Data Privacy & Regulatory Tech Integration Balancing AML compliance with data privacy is now a priority, with RegTech driving efficiency and control. 5️⃣ Collaborative & Cross-Border Compliance Global information sharing and interbank cooperation are setting the stage for stronger, unified compliance frameworks. 🌐 AML professionals must adapt to these trends to ensure robust compliance, minimize risk, and safeguard financial systems.

🧠 Crypto Laundering & AI: A New Era of Digital Asset Intelligence As crypto adoption accelerates, so does the sophistication of financial crime. Lucinity’s recent article on crypto-driven laundering and AI agents offers a compelling look at how artificial intelligence is transforming digital asset investigations—from reactive detection to proactive intelligence. Traditional AML systems struggle with the speed, anonymity, and decentralization of crypto transactions. Criminals exploit mixers, DEXs, and cross-chain bridges to fragment audit trails and obscure fund origins. But AI agents—especially those designed with explainability and human-in-the-loop oversight—can detect subtle patterns, adapt to emerging typologies, and surface actionable insights for compliance teams. 🔍 Key Capabilities of AI Agents in Crypto AML - Entity resolution: Linking pseudonymous wallets to behavioural profiles - Typology mapping: Identifying laundering patterns across smart contracts and DeFi protocols - Alert prioritization: Reducing noise and surfacing high-risk cases - Explainable logic: Providing transparent rationale for flagged activity Lucinity emphasizes that AI isn’t just about automation—it’s about augmentation. The most effective systems combine machine intelligence with human expertise, enabling investigators to navigate blockchain complexity with clarity and speed. 🛡️ Why This Matters for Fintech & Compliance Leaders Crypto laundering is no longer fringe—it’s systemic. Regulators are demanding more transparency and auditability in AI-driven compliance. Firms that invest in explainable, adaptive AI will be better equipped to manage risk and scale responsibly. The future of AML isn’t just digital—it’s intelligent. And in the world of crypto, intelligence means seeing what others miss. Read the full article here:- https://lnkd.in/ehcQQU2v #CryptoCompliance #AML #AIinCompliance #Lucinity #DigitalAssets #BlockchainRisk #SmartContractLaundering #TypologyFramework #RegTech #FinancialCrime #LinkedInCrypto #ComplianceLeadership #ExplainableAI #CryptoForensics #DeFiRisk