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Anti-Money Laundering Regulations — is your crypto-business safe and compliant?

With cryptocurrency giving criminals a new way of money laundering, it’s important that you safeguard your business and stay compliant. Here’s everything you need to know.

The birth of blockchain technology and cryptocurrencies has opened up a wealth of opportunities to businesses — from speeding up payment processes to safely sharing data for a more streamlined process.

Yet, despite its positive impact, its also presented a new platform for entities to money launder. In fact, the head of Europe’s policy agency revealed that criminals in Europe used cryptocurrencies to launder around £4 billion in illegal money.

The most common cases of money laundering within the cryptocurrency world are to disguise profits made from illegal activities like drug trading, dealing weapons, human trafficking and organised crime.

In light of this, governments around the world have implemented more strict Anti-Money Laundering (AML) regulations. While it may feel like an inconvenience or infringement of financial privacy, they are necessary for securing the future of your business and the use of cryptocurrency.

Here’s a quick rundown of the current Anti-Money Laundering regulations and what you need to do in order to stay compliant in the eyes of a regulator.

The four Anti-Money Laundering pillars

Determining which AML regulations apply to a business depends on their customer base, size, geography and products offering. However, every business, regardless of size, is required to comply with four key Anti-Money Laundering pillars, including:

1. A system of internal controls to ensure ongoing compliance

This should identify high-risk operations, keep all directors updated about compliance and follow Customer Due Diligence or KYC policies and processes. The internal system of controls should also enable a business to identify transactions, monitor suspicious behaviour and fill out all necessary reports — including Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).

It’s worth noting that all FinTech-regulated bitcoin business must have a transaction monitoring programme to successfully recognise reportable transactions and a method of filing reports. Failure to do so is a serious offence and could lead to prosecution.

2. Independent testing of your compliance procedures

Any testing for Anti-Money Laundering compliance should be carried out by an independent professional and follow these four pillars as a method of rating. By correctly completing a compliance test, this will demonstrate the trustworthiness of a business to the Regulators and other stakeholders.

3. A designated person or team managing compliance

When designating a person or team of professionals to manage the compliance of a company, a business should ideally choose a compliance officer who has a broad knowledge on the subject, without any conflicts of interest. Outsourcing to specialist companies or skilled professionals is always the best solution for this.

4. Training for all applicable personnel

When it comes to pleasing Regulators, they want to see a business who is educating and training their staff on the subject of money laundering. This shows due care and a willingness to safeguard important data.

Regulators will look at how often you carry out training, the attendance documentation, training material and any internal penalties you have in place for those who do not comply.

What is a Know Your Customer (KYC) / Customer Identification Program (CIP)?

Before carrying out any transactions, a business should ensure they have checked to see whether the customer or entity is who they say they are.

Recognised as a Know Your Customer (KYC) or Customer Identification Program (CIP), this includes verifying the identity and record-keeping, carrying out government list comparisons and giving notice to customers.

This includes checking whether a user or company is blacklisted or under sanctions. In Europe, this comes in the form of the Freeze List and in England, the Bank of England Sanctions or HM Treasury List.

Final Thoughts

As previously mentioned, Anti-Money Laundering regulations and the lengths a business has to take depends on its nature and size. However, as a business, it’s essential to stay compliant and safeguard yourself. This will show Regulators and the appropriate authorities that you are credible and able to safely, securely and lawfully deal with bitcoin and other cryptocurrencies.

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About the author

Simone D. Casadei Bernardi

I have a strong expertise in internationalisation strategy, company formation, financial and blockchain projects' compliance, and business analysis. Please, feel free to connect with me.


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