What is the primary goal of Anti-Money Laundering (AML) regulations?

The primary goal of Anti-Money Laundering (AML) regulations is to prevent the use of the financial system for illicit purposes. This encompasses a range of activities aimed at detecting and deterring financial crimes such as money laundering, terrorist financing, and other forms of financial misconduct. By imposing regulations and requiring institutions to monitor and report suspicious activities, AML frameworks help safeguard the integrity of financial systems and maintain public trust in those systems.

Preventing illicit use is crucial as criminals and organizations often seek to exploit financial institutions to disguise the origins of illegally obtained funds. AML regulations establish the legal requirements that institutions must follow, thus implementing a proactive approach to identifying and mitigating the risks of being utilized for unlawful activities. This protection benefits not only the institutions themselves but also society at large by reducing the potential for crime and corruption in financial markets.

The other options do not align with the primary objectives of AML regulations. Reducing transaction costs and promoting financial innovation, while beneficial, are not the central aims of AML efforts. Similarly, facilitating international financial transactions is a broader economic goal that may be influenced by AML compliance but is not synonymous with preventing illicit financial activities.