A Guide to Anti-Money Laundering for Crypto Firms

The Fourth AML Directive: Filling the Silence

Regulation Knowledge & Training

Although the Fourth Anti Money Laundering Directive is now “set in stone”, the UK does still have some degree of flexibility in how it implements the European requirements. This was what the Head of Financial Crime at the FCA (Rob Grupetta) reminded his audience of in a speech on the 8th December.
With this Directive set to have a huge impact on (among other areas) due diligence in financial services, his enthusiastic invitation to the industry to have a say in how it is implemented over the next two years is very welcome. Grupetta drew attention to two levels of consultation:

UK Government Consultation: Up and Coming

Grupetta emphasised that the Treasury’s officials will want the industry to tell them if “the law asks for things that are unduly burdensome”, given it is the industry that must take practical steps to put anti money-laundering measures into effect. He insisted that consultation is not futile, given the gaps in the Directive that the UK government will need to fill. These include:

  • What “screening employees” (which the Directive requires firms to do) will practically involve
  • How British law will explicitly demand that financial firms apply checks to British public officials (as politically exposed persons), for the first time

The government has not yet published a consultation paper, but it will “soon”.

EU Consultation: Time Running Out

The EU is in the process of producing its own set of guidance: this guidance matters because national regulators must make every effort to comply with it. Lead by a joint committee of the EBA, ESMA and EIOPA, the EU is consulting on this guidance until the 22nd January 2016, so any input needs to be speedily submitted.  A public hearing on the consultation has already been held (on the 15th December) at the EBA offices in London.

There are two sets of guidelines. The “Risk-Based Supervision Guidelines” consultation is only addressed to member state regulatory authorities. The “Risk-Factor Guidelines” consultation is addressed to both credit and financial institutions, as well as the regulatory authorities, and can be found here. Specifically, some questions the EU wants feedback on from this consultation include:

  • Whether the guidance is conducive to firms adopting risk-based, proportionate and effective anti-money laundering policies
  • Whether the guidance is conducive to competent authorities effectively monitoring compliance

European financial crime requirements over anti money laundering

Staying in the Loop

We note the current EU guidance’s emphasis on the importance of a firm regularly reviewing “relevant information sources” (so that they identify emerging risks). In particular, reviewing “media reports”, “law enforcement alerts” and “thematic reviews” published by the authorities.

Our take-away: it’s becoming increasingly important for data providers to offer compliance professionals a fast and effective adverse media screening service.

Originally published December 17, 2015, updated November 17, 2021

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