Could DAOs Purchase Smart Contract-Based Insurance Policies to Cover Potential Regulatory Fines for AML Failures?

Yes, this is a developing area of "DeFi insurance." A DAO could purchase a policy from an insurance protocol where the terms of coverage are encoded in a smart contract. The policy might cover specific, auditable events, such as a regulatory fine being levied.

Payouts would be triggered automatically based on a verifiable on-chain event or a decision by a decentralized oracle network. However, the challenge lies in underwriting such a risk, as the probability of AML failure is difficult to quantify, and insurers would need to be confident that the DAO is acting in good faith.