Definition:
Anti-Money Laundering (AML) refers to laws and regulations aimed at preventing criminals from disguising illegally obtained money as legitimate income. These regulations require financial institutions to detect and report suspicious activities.

Contextual Explanation:
Financial institutions and PSPs must implement AML programs, conduct due diligence, and monitor transactions for suspicious activities to comply with regulatory obligations.

Why It Matters:
AML compliance helps prevent financial crimes, reduces regulatory risks, and maintains trust in the financial system. Non-compliance can lead to fines, legal action, and reputational damage.

Example:
A bank detecting multiple large cash deposits from a single customer within a short period flags the activity for review as part of its AML compliance program.