Does a bitcoin exchange need a KYC & anti money laundering policy?

In the realm of cryptocurrency and finance, the question of whether a bitcoin exchange necessitates a Know Your Customer (KYC) and Anti-Money Laundering (AML) policy is a pertinent one. Given the decentralized and often anonymous nature of Bitcoin transactions, it's crucial to ensure that exchanges are compliant with regulatory requirements and safeguard against illicit activities. Could you elaborate on the importance of implementing KYC and AML policies for Bitcoin exchanges? How do these measures contribute to maintaining the integrity of the cryptocurrency ecosystem and protecting users from potential risks?