In January 2020, the EU’s fifth Anti-Money Laundering Directive (5MLD) came into force, expanding the sectors that will now become obliged entities to include Virtual Assets and Virtual Asset Service providers, otherwise known as “Cryptoasset businesses”. 5MLD obliges Cryptoasset businesses to implement robust risk-based policies and procedures to comply with Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Regulations, just like banks and other traditional financial institutions.
The UK Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) transition the 5MLD, and a wider range of activities as recommended by the Financial Action Task Force, into UK law (whilst the UK formally left the EU on 31 January 2020 it is still bound by EU laws and regulations until the transition period ends at the end of 2020). The MLRs established the UK Financial Conduct Authority (FCA) as the AML/CTF supervisor of UK Cryptoasset businesses.
Individuals and businesses who perform Cryptoasset activities within the scope of the MLRs Regulations 8 and 9 must register with the FCA for AML/CTF purposes (refer to Section B for details on geographic scope). The MLRs state:
The FCA urges businesses to seek advice over whether they are required to register.
Assessments on whether an institution is doing business in the UK will be determined on a case-by-case basis. The FCA has set out some of the factors they will consider when making this decision, including whether:
The FCA will also use other factors to decide whether business is being carried on in the UK:
The FCA requires Cryptoasset businesses to provide the following information at registration:
The FCA will also require information on all key individuals who hold a relevant function in the business in order to assess if these individuals are “fit and proper” under Regulation 58A.
The FCA Board has agreed that the charges will be £2,000 for businesses with UK Cryptoasset income up to £250,000 and £10,000 for businesses with UK Cryptoasset income greater than £250,000 per reporting year.
All businesses falling within scope of the MLRs will need to consider their compliance with the requirements by making sure they:
Guidehouse professionals who collectively combine industry and consulting experience, including in relation to Cryptoassets, can help you to:
Guidehouse professionals have extensive experience in relation to Digital Assets, Trading Venues and Digital Payments. We help clients address their toughest challenges with a focus on markets and clients facing transformational change, technology-driven innovation, and significant regulatory pressure. Specifically, we have been engaged by initial coin issuers and administrators, trading platforms, virtual commodity associations, digital asset exchanges and money service agents. Our projects have included designing and developing AML/sanctions compliance framework documentation, conducting and remediating customer due diligence, performing independent testing, monitoring and investigations, and delivering training. We have also been engaged to act as special advisors and to provide outsourced AML transaction monitoring and fraud investigations services to Cryptoasset businesses.