Cryptocurrency and AML

June 26, 2018

Aml's procedures are not only binding for the traditional financial system but also for new currencies (cryptocurrencies). This is not a trend but a practice that will be increasingly in future legislation. An example: the new anti-money laundering directive. European Parliament and the European Council agreed to an amendment to the Fourth Anti-Money Laundering Directive to include measures targeting exchange platforms for virtual currencies. The reasons for these important changes start with agreements in international organizations. Financial Action Task Force (FATF) signaled that “will step up its efforts in monitoring the use of cryptocurrencies in money laundering.” Today the 37 FATF members remain without an official policy for implementation. This pronouncement demonstrates the heightened anti-money laundering concern from regulators across the globe concerning illicit uses of cryptocurrency. In the UK., Parliament’s Treasury Committee has launched a probe to examine as the impact of cryptocurrencies on financial institutions and how best to police the new technology. In the United States is rising focus on cryptocurrencies. Deputy Attorney General Rod Rosenstein announced that the Department of Justice is developing a “comprehensive strategy” to address the concern that cryptocurrencies may be used for money laundering. Given regulators’ intense focus on this market, it will be likely that cryptocurrencies will be a topic of discussion at the upcoming international summits. An example: Treasury Secretary Steven Mnuchin said the U.S. will work with G20 nations to ensure cryptocurrency accounts do not “become the Swiss-numbered bank accounts.”

To be compliance, in the future, digital currency providers will soon be required to adhere to the AML standards. For remittance sector providers the providers will be required to:

1. adopt and maintain an AML program;

2. conduct thorough customer identification and due diligence;

3. comply with suspicious matter reporting and threshold transaction reporting

4. comply with all record-keeping requirements under the rules regime.

In the most case, providers will be registered in a National Authority in a regime similar to the current financial registers.

Most likely, many legislations will begin to ask for much information and details on operations (I was inspired by guidelines of the Australian Financial Control Authority), these additional requests will concern digital currency providers will need to provide the information in circumstances warranting a reportable transaction:

1. the denomination or code of the digital currency and the number of digital currency units;

2. the equivalent total amount of digital currency in local national currency (if known);

3. a description of the digital currency including details of the backing asset or thing (if known);

4. the Internet Protocol address information of the beneficiary and/or payee (if known);

5. the social media identifiers of the beneficiary and/or payee (if known);

6. the unique identifiers relating to the digital currency wallet(s) of the beneficiary and/or payee (if known);

7. the unique device identifiers of the beneficiary and/or payee relating (if known).

It is time to start thinking about how to change cryptocurrency with new future obligations...

 

Giacomo Breda

https://www.linkedin.com/pulse/cryptocurrency-aml-giacomo-breda/?published=t

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