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.
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:
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.
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.
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.
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.
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.
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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Dr. Justin S P Chan has a passion for clarity and synergy - seeing through the complexity of the intersecting spheres of technology, finance, innovation and social dynamics, to enable game-changing collaborations between entrepreneurs and innovative opportunities. Combining the vision of a true inventor and entrepreneur with his data-driven, evidence-based approach to investment, Justin also co-founded OCIM and serves as Chief Investment Officer for its fund management platform. Within OCIM, He co-manages OC Horizon Fintech, a transformational hedge fund, where he blends real applications, expertise and future-awareness into truly exceptional investment performance. Justin gains inspiration for these projects from his global network of contacts in investment and fintech communities, where he stays on the pulse of fast-moving conversations and trends affecting global markets and emerging technologies.
John DeCleene is a fund manager for OCIM’s fintech fund, and currently progressing towards becoming a CFA charter holder. He loves to travel for business and pleasure, having visited 38 countries (including North Korea); he represents the new breed of global citizen for the 21st century. Whilst having spent a lot of his life in Asia, John DeCleene has lived and studied all over the world - including spells in Hong Kong, Mexico, The U.S. and China. He graduated with a BA in Political Science from Tulane University in 2016.
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