It is not long now until the Financial Conduct Authority (FCA) becomes the anti-money laundering and counter terrorist financing (AML/CTF) supervisor of UK cryptoasset businesses.
What does this mean?
There are two aspects at play here:
1. From January 10th, 2020 the FCA will become the AML/CTF supervisor of cryptoasset businesses. On this date the gateway to apply to register with FCA will be opened.
2. From January 10th, 2020 all cryptoasset businesses will need to comply with money laundering regulations, irrespective of whether you have registered with the FCA, or made an application to register.
Different rules apply to new and existing cryptoasset businesses.
If you are a new cryptoasset businesses that intends to carry on a cryptoasset activity after 10 January 2020, you must be registered before doing so.
If you are an existing cryptoasset businesses already carrying out cryptoasset activity, you may continue business, in compliance with the money laundering regulations, but must register by 10 January 2021 or stop all cryptoasset activity.
The details for this process are set out on the FCA’s page. Here is a snapshot of the timeline.
Which cryptoasset activities are affected?
The following activities will all fall under the money laundering regulations:
- Cryptoasset exchange providers
- Cryptoasset automated teller machines
- Custodian wallet providers
- Peer-to-peer providers
- Issuers of new cryptoassets, such as initial coin offering (ICO) or initial exchange offering (IEO)
- Publication of open-source software, such as non-custodian wallet providers
How to comply with the money laundering regulations?
As explained in the money laundering regulations, you’ll need to take appropriate steps to identify and assess the risks of money laundering and terrorist financing. You’ll also need to establish and maintain policies, controls and procedures to mitigate and manage those risks.
As compliance technology specialists, we suggest you consider the following:
1. Know your customer (KYC)
Install a process to identify and verify the identity of your customers. There are many technology solutions out there that can facilitate this process.
2. Client and sanctions screening
Put in place a system or process to enable you to check if your clients, suppliers or business partners are politically controversial or have negative press; or if they are or have been involved in crime or terrorism.
It is not enough to simply verify the identity of your customers. By definition, all money launderers pass these entry checks. Therefore, it becomes important to monitor all transactional activity and look for emerging patterns that may betray the launderer.
This function checks who the beneficiaries of payments are – whether they on a sanctions or any other watch list - giving you the ability to block payments where necessary.
5. Ongoing customer activity review
Complementary to transaction monitoring, ongoing reviews give you a better picture of who your customers are, and how their behaviour is reflective of what is expected.
Each of these activities need to be effective in their own right to successfully identify suspicious activity and money laundering.
What do I need to do now?
If you’re already trading, the best place to start is to:
a) Apply to be registered with the FCA.
All registration applications must be received by October 10th, 2020.
b) Determine how you’re going to comply - the expert team at Napier will be happy to demonstrate how our intelligent compliance platform can help your business.
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To find out more about how Napier can help you comply with 5MLD, book a demo to see our solution, or feel free to email us for a chat.
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Where can I get more guidance?
- The FCA has created a webpage specifically for supporting cryptoassets
- The Financial Action Task Force is an inter-governmental body which sets standards and promotes the effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. It has a library of helpful recommendations publications.
- The Joint Money Laundering Steering Group is made up of the leading UK Trade Associations in the Financial Services Industry. Its aim is to promulgate good practice in countering money laundering and to give practical assistance in interpreting the UK Money Laundering Regulations. It has produced several helpful guidance documents.
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Napier's Intelligent Compliance platform is transforming compliance from legal obligation to competitive edge. We provide easy to integrate end-to-end compliance solutions powered by artificial intelligence and the latest data management technology.
To find out more about how Napier can help you comply with 5MLD, book a demo to see our solution, or feel free to email us for a chat.
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Image by Pete Linforth from Pixabay
