This chapter delves into the intricate relationship between digital assets, specifically non-fungible tokens (NFTs), and the regulatory landscape of anti-money laundering (AML) and counter financing of terrorism (CFT). With the rapid emergence of NFTs, new challenges and opportunities have arisen, necessitating an exploration of evolving regulatory frameworks and enforcement measures to combat AML and CFT risks associated with digital assets. This chapter focuses on the unique characteristics of NFTs, AML, and CFT risks within the NFT market, global regulatory developments, compliance challenges, technological solutions, enforcement actions, collaborative efforts, and future trends. By analyzing these aspects, this chapter aims to provide insights for policy-makers, regulators, scholars, and industry participants in effectively addressing financial crime risks in the digital asset landscape.

The channels identified as highly vulnerable to money laundering activity are money remitters (both licensed and underground operators), corporate vehicles, designated non-financial businesses and professions, and the banking sector. As gatekeepers of the financial system, banks are required to develop and implement policies and practices that mitigate the money laundering risks that apply to them. Banks that use AI have the potential to make anti-money laundering (AML) measures faster, cheaper, and more efficient. AI could help to identify risks and respond to, communicate and monitor suspicious activity more effectively, ultimately assisting banks in maintaining compliance with AML standards. This chapter aims to shed light on the advantages and challenges of adopting AI to mitigate money-laundering risks and protect the integrity of the financial system.