AML & Compliance and Cryptocurrency

AML (Anti Money Laundering) and Compliance

How does the need for ongoing AML regulatory compliance impact the acceptance of cryptocurrency?

Since the launch of Bitcoin in 2009, the world of cryptocurrency has grown immensely. It is a new and innovative way of addressing the world’s economic needs and has led to some great advancements in financial infrastructure. The ongoing question, however, which affects stakeholders, including regulators, compliance professionals and law enforcement, is how do the AML (Anti-Money Laundering) Regulations impact acceptance of cryptocurrency?

There is a general lack of clarity surrounding AML compliance and cryptocurrency, and stakeholders are often confused by whether or not it should be accepted and if so, how they can protect themselves from breaching AML Regulations.

Given the considerable and rapid growth of cryptocurrency adoption, this has become a key issue in compliance circles. While many cryptocurrency transactions have proven to be legitimate, the mere fact that cryptocurrency does not fall under a traditional financial system heightens its appeal to cybercriminals and other money launderers. It is essential for companies impacted by the AML Regulations to understand this new and non-traditional financial system, and the risks it poses to minimise any criminal activity. 

The importance of AML compliance regarding Crypto exchanges

With the adoption of cryptocurrencies on the rise, many firms are rightly reconsidering the importance of Anti-Money Laundering compliance. Many authorities have been trying to fight for stricter AML and compliance measures for crypto risks for years.  In countries like Switzerland, they have adopted an open approach that allows for investment and trade; however, as at September 2021, more stringent measures were being imposed in recognition of the risks.  Countries such as China and India have strict restrictions on mining and exchanges. In these cases, compliance with AML measures have become a standard procedure.

The unpredictability of cryptocurrency has incentivised governments to put more effort into developing a more regulatory framework for cryptocurrency globally. The FATF (Financial Action Task Force) has said they are working on this and managed to set international AML standards in June 2019. It has been suggested in regulatory circles however that without government intervention, crypto businesses must encourage regulation to enhance the addressable market for adoption.

What are the current AML Regulations on Crypto exchanges?

Regulators in Asia are most likely to take progressive steps regarding crypto regulations. It has been found that the Monetary Authority of Singapore (MAS) enhanced their engagement with the sector in 2018. The EU’s fifth Anti-Money Laundering Directive outlines the AML Regulations for cryptocurrency exchanges in the member states, and these were to be followed in 2020. In the EU, the law differs when considering fiat-to-crypto exchanges. Exchanges from Fiat currency to Crypto need to implement KYC (Know Your Customer/Client) checks, but other exchanges which only consist of Crypto do not.

On the other hand, in the USA, FinCEN views all cryptocurrencies in the same way, meaning all cryptocurrency exchanges must carry out KYC checks and have effective AML policies, regardless of the currency.

How can AML and Compliance enhance my understanding of Cryptocurrency and AML Regulations?

Part of the Anti-Money Laundering (AML) Regulations require a business to undertake a formal risk assessment. The predominant purpose of this is to identify, manage and, where possible, eradicate the potential for the business to be caught up in money laundering, and cryptocurrency considerations form part of this.

Regardless of the size of your business and the complexity of your structure, a risk assessment must be performed. We can support you with this and work with businesses of all sizes and across all sectors and multi jurisdictions.

A risk assessment provides a valuable insight into a business when performed correctly. They do not just provide an overview of risk but also highlight issues within the business, so it is important to undertake a risk assessment properly. The many aspects which form the building blocks of a company need to be considered, such as its the staff, clients, operations and finances. Find out more about the risk assessments provided by AML and Compliance by visiting our risk assessments page.

By working with AML and Compliance, a business can be assured that we will bring the required level of knowledge and expertise needed to perform a risk assessment which has value to the business and is not simply a box-ticking exercise.

To enquire about our risk assessment services and how AML and Compliance can work with your business, you can call us on 0203 985 8553, email us or complete an enquiry form. Click here for more information about our services.

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