Crypto’s AML Compliance Revolution and What Midsize and Community Banks Can Learn from It

Cryptocurrency has transformed how money moves, but it has also changed how criminals attempt to exploit financial systems. From pig-butchering scams draining retirees’ savings to ransomware attacks paralyzing hospitals, bad actors are taking advantage of crypto’s speed and borderless nature to commit fraud. In response, leading companies in the crypto space are prioritizing compliance to build greater trust with the public, traditional financial institutions, law enforcement, and other partners, and strengthen the ecosystem against misuse. 

As crypto-native anti-money laundering (AML) programs evolve, their fresh, risk-based approaches can help to shape best practices across the broader financial system. Seth Sattler, Chief Compliance Officer at Chicago-based Coinflow Labs, is one professional on the front lines of making compliance a cornerstone of the crypto industry. His insights can offer valuable lessons for financial institutions, including midsize and community banks, as they strive to protect their customers and communities from financial crime. 

An uncharted path: building a career in crypto compliance 

After starting out on a traditional AML path—monitoring alerts and testing transaction scenarios at a regional bank—Sattler realized he wanted to build an entire compliance program, not just optimize a small piece of it. That ambition drew him to crypto, a high-risk, fast-evolving sector where creativity and adaptability are essential to success in just about any role, let alone compliance. 

“I took the scenic route,” Sattler says, describing his transition from banking into crypto, which he calls “an emerging space that comes with new challenges” to build a compliance program and test new ideas. He has since developed compliance frameworks for Bitcoin ATMs, supported ransomware response initiatives, and now leads global compliance efforts at Coinflow Labs, a stablecoin-based payments company focused on enabling real-time settlement between merchants worldwide. 

What keeps Sattler motivated after nearly a decade in such a demanding field? “There is never a lack of challenges or things to learn—new typologies, new regulations, new expectations from banks and our payments partners,” he says. “Things are always changing, and I am often tasked with finding creative solutions for problems that no one has really faced before.” 

Sattler’s experience reflects how crypto compliance roles can demand fast, flexible thinking in the face of constant change. That adaptability is essential because the risks themselves are evolving just as rapidly. 

Keeping pace with criminal innovation in the fast-moving crypto era 

While many crypto-related fraud schemes rely on the same social engineering and manipulation tactics seen in traditional finance scams, their execution has grown far more sophisticated and harder to detect in many cases. Take romance scams, for example. They have evolved into elaborate “pig butchering” operations, where scammers patiently build trust with victims over weeks or even months before draining their cryptocurrency wallets. 

“Pig butchering has taken romance fraud to a whole new level,” says Sattler, noting that fraudsters combine psychological manipulation with the near-instant finality of some digital assets to move stolen funds both quickly and quietly. 

Beyond consumer fraud, nation-state actors are increasingly exploiting cryptocurrency to fund their operations. Hackers linked to Russia, North Korea, and other hostile regimes have turned to digital assets for ransomware payments, sanctions evasion, and illicit financing—with some reported cases of attempts to infiltrate legitimate crypto firms from within. “Unfortunately, crypto is being used by hackers around the world to fund less-than-ideal activities,” Sattler acknowledges. 

Meanwhile, the illicit marketplaces that once revolved around Silk Road—an early darknet platform notorious for enabling anonymous drug and illegal goods sales via Bitcoin—have grown exponentially. “Silk Road was minuscule compared to the marketplaces operating today,” Sattler says, highlighting how modern dark markets move far greater sums and constantly evolve to stay ahead of law enforcement. 

Perhaps most concerning—and frustrating—for the cryptocurrency industry is that the very features that attract legitimate users, such as speed, low fees, and global reach, also appeal to organized criminals. That’s why, according to Sattler, compliance teams need to walk a fine line—facilitating legitimate transactions while vigilantly monitoring for red flags. 

Applying resilient controls in a shifting regulatory landscape 

Traditional banks, especially midsize and community institutions, have much to learn from how crypto compliance leaders like Sattler and their teams adapt to rapid change. Perhaps the most important lesson is flexibility. In an environment where regulations shift constantly, crypto compliance programs don’t wait for perfect clarity; instead, they build strong controls designed to pivot as rules evolve. 

While there is talk of more “crypto-friendly” regulation in the U.S. and elsewhere, Sattler says that financial institutions should not interpret this as a relaxation of compliance expectations, which remain high. “It’s not the Wild West, even if it seems like it,” he says, emphasizing that compliance professionals should prepare for new guidance while assuming existing rules still apply. 

Crypto compliance programs also illustrate the value of pairing technology with traditional practices. Tools such as blockchain forensics, wallet screening, and advanced AML transaction monitoring capabilities can provide near real-time visibility into the flow of funds. “With crypto, we have more insights into where money is coming from and where it’s going than we would with any cash transaction,” Sattler says. 

Still, the fundamentals matter. Robust Know Your Customer (KYC) processes, enhanced due diligence, and thorough risk assessments are just as critical in crypto as they are in traditional banking—a reminder that strong AML foundations are vital, no matter how the money moves. 

Navigating crypto risks and compliance challenges through knowledge sharing 

Among the most positive developments in the new frontier of crypto compliance is the growth in collaboration and information sharing among regulators, law enforcement, crypto platforms, and financial institutions. Public scam-reporting tools, cross-platform alerts, and collective intelligence groups are all gaining traction as fraud fighters seek to understand and prevent crypto-related risks. 

Sattler says continuous learning is critical for his peers in compliance, given the vast and fast-changing nature of crypto. “There’s no such thing as a crypto expert. You have to specialize,” he explains. “Even at major blockchain forensics firms or exchanges, there’s an expert on NFTs, another on ransomware, another on exchanges. It simply isn’t possible for one person to know everything.” 

For financial institutions, acknowledging both the persistence and future significance of cryptocurrency is vital to building effective crypto compliance strategies. Even if a midsize or community bank has no immediate plans to handle cryptocurrency directly, its customers will inevitably interact with digital assets—whether through payments, investments, or new types of fraud—creating exposure for the bank even if it does not process crypto transactions itself. 

Banks that act now to build knowledge, implement strong controls and AML technology solutions, and adopt crypto compliance best practices will be well-positioned to protect their customers and uphold their mission to serve the community—especially as cryptocurrency becomes a fixture in the global financial ecosystem. “Crypto is coming to you, so you better be ready,” Sattler says.