Last year, the Financial Action Task Force (FATF), the global anti-money laundering (AML) watchdog, updated its guidance for developing a legal framework for virtual assets and VASPs, virtual asset service providers. The FATF has called for rapid implementation of recommendations regarding virtual assets by all member states until June 2020. The EU’s Fifth Money Laundering Directive (5MLD) imposing AML obligations on virtual assets already came into effect on Jan 10. Finalizing EU-UK divorce, the UK parliament has passed the British version of the Anti-Money Laundering Directive last month.
Key features of the British Anti-Money Laundering Directive
- Regulated entities need to register with the relevant regulatory authority.
- All regulated businesses shall follow certain mandatory procedures to verify ultimate ownership and identity of a customer.
- Businesses carrying out cryptoasset activities are now subject to Money Laundering Regulations. Thus, KYC (Know Your Customer, also known as Customer Due Diligence) must be conducted for customers who participate in a cryptocurrency transaction.
- The new law defines cryptoasset exchange provider as a company or sole practitioner who by way of business provides one or more of the following services:
(a) exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets
(b) exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
(c) operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets.
- Custodian wallet provider refers to a company or sole practitioner who by way of business provides services to safeguard, or to safeguard and administer
(a) cryptoassets on behalf of its customers, or
(b) private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets.
- For the purpose of CDD, businesses shall obtain at least the following information:
- full name of the customer
- photographic ID and date of birth on an official document (e.g. a passport)
- recent proof of a customer’s residential address.
- For company, trust or partnership, the process may be more complicated as the relevant ownership structure needs to be established. Then they need to conduct CDD on the ‘ultimate beneficial owner’ (UBO) or client.
- Once individual customers or UBOs are identified, they need to be checked against ‘watch lists’ for sanctioned individuals and ‘politically exposed persons’ (known as PEPs).
With the EU 5AMLD transposed across the continent, the UK takes a similarly tough line regarding AML, joining the global efforts for the fulfillment of the FATF Recommendations. To lessen the burden of building AML department in your company from scratch, there are a number of competent third-party service providers who offer verification and screening services like ARGOS. Those who were unwilling to take the steps towards compliance have already fled. Those who remain shall prepare their compliance system is up to standard.
“Create A World Where Good People Transact Safely and Keep The Bad People Out.”