In the European Union, the fifth Anti-Money Laundering Directive (5AMLD) entered into force on 9 July 2018 but impacted firms have until January 10, 2020, to become compliant.
Crypto companies, or virtual asset service providers (VASPs), will be expected to step things up and adhere to rules that set a high level of due diligence and the need to submit suspicious activity reports (SARs) while monitoring all transactions. Recent FATF guidance is part of this too.
This past October, the Financial Intelligence Analysis Unit published a consultation document on the Prevention of Money Laundering and Funding of Terrorism Regulations (or PMLFTR). Feedback regarding the consultation was due November 5, 2019 and thus the regulations should be hardening now.
If you are a VASP, there are some things you simply must due.
Elliptic, a crypto compliance and forensic firm, has put together a high-level overview of the compliance demands. You can read the whole thing here. If you are a crypto exchange most certainly you have already engaged with counsel to ensure you do not get tripped up.
Here is Elliptic’s summary of requirements:
- Secure all necessary registration and licensing: Europe is a single market but member states still have regional rules. You will need to be in compliance with every member state where you provide services
- Conduct a risk assessment of your business: “If you are unable to demonstrate to your regulator that you have the systems and policies in place needed to ensure preparedness in mitigating risks you face, you could find yourself facing a visit from the regulator,” says Elliptic.
- Implement a robust blockchain monitoring solution for AML: This is probably the best one of all. You have to know who is selling and know who is buying for most of your crypto transactions.
Of course, Elliptic would like to to have your business but there are multiple good options alongside Elliptic.
While some VASPs have complained about the stringent requirements being foisted upon them, if they ever want to establish the industry as a respected segment of the financial services industry – this is the designated path.