AML/KYC Framework

Definition ∞ An AML/KYC framework consists of rules and procedures financial institutions employ to prevent illegal financial activities. This framework requires identifying and verifying client identities and monitoring transactions for suspicious behavior. It helps financial entities comply with legal requirements and mitigate risks associated with money laundering and terrorism financing. Adherence to these guidelines is crucial for maintaining financial system integrity.
Context ∞ The application of AML/KYC frameworks within the digital asset sector faces continuous adaptation as new technologies and transaction methods surface. Regulators worldwide are refining their approaches to extend these requirements to decentralized finance and various crypto platforms. This ongoing adjustment aims to balance innovation with the imperative to prevent illicit financial flows, a key area of current regulatory discussion.