Can Differences in Anti-Money Laundering (AML) Regulations between Countries Create Risks for Arbitrageurs?

Yes, differing AML regulations create significant risks. An arbitrageur might need to move funds through exchanges in jurisdictions with varying levels of regulatory scrutiny.

A country with strict AML laws might freeze funds or close an account if a transaction is flagged as suspicious, even if it is a legitimate arbitrage trade. This can result in a total loss of capital.

The lack of international regulatory harmony means an action that is perfectly acceptable in one country could be a violation in another, creating a complex and risky compliance landscape for the trader to navigate.