5 things to do for cryptocurrency businesses to be AMLD5 Compliant

EU 5th Anti-Money-Laundering Directive: countdown before cryptocurrencies under the scope.

January 10, 2020, European Union cryptocurrency businesses need to comply with AML requirements.

DIRECTIVE (EU) 2018/843 of the European Parliament and of the council of 30 May 2018 puts cryptocurrency business under the scope, especially:

  • Cryptocurrency exchanges
  • Custodian wallet providers

The directive amends the Fourth Money Laundering Directive. The European Commission has provided a legal definition for virtual currencies and custodian wallet providers as follow:

(2) Article 3 (d) (18) “virtual currencies” means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically;

(19) “custodian wallet provider” means an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.’;

Basically, the AMLD5 puts cryptocurrency exchanges and custodian wallet providers under the AMLD4’s definition of ‘obliged entities‘. For the record, ‘obliged entities‘ are subject to obligations to implement preventative measures and report suspicious activity.

January 10, 2020, is the date for European Union members transposition. It means every member state gives force to a directive by passing appropriate implementation measures. Cryptocurrency businesses need to be compliant on that date.

In 2022, the EU Commission should examine and maybe draft, legislative proposals regarding member states of central databases registering users’ identities and wallet addresses.

WHAT TO DO?

You are under the scope if you are a cryptocurrency business or a wallet service provider operating in the EU. Your EU subsidiaries are also under the scope.

  • Check local regulatory framework and requirements for pursuing a cryptocurrency business depending on your business country registration.
  • Define a risk-based approach regarding cryptocurrencies transactions. Proactivity is key to demonstrate your risk mitigation and will to comply.
  • Ensure to add AML, CTF and tax evasion compliance procedures to your internal controls.
  • Implement customer due diligence controls for transaction monitoring and report suspicious activity.
  • Implement a blockchain monitoring tool for your business.

Scorechain Analytics is one of the easiest solutions to implement. We have a transparent risk-assessment methodology and give you the possibility to customize features for tailor-made compliance and Know-Your-Blockchain-Business.

WHAT ARE THE RISKS?

In case of non-compliance, you can risk penalties and businesses shut down.

Have you a cryptocurrency established business in the European Union? We can help you to enhance your due diligence processes and put proper internal controls in place to be ready for AMLD5.

CONTACT US.