The Anti-Money Laundering Act of 2020 (AMLA) took effect on Jan 1, 2021 and it has been since then the most significant and comprehensive overhaul to the U.S. anti-money laundering and countering the financing of terrorism (“AML/CFT”) regime since the USA PATRIOT Act. The AMLA amends the Bank Secrecy Act (“BSA”) to impose new obligations on FinCEN, the agency primarily responsible for maintaining and enforcing AML/CFT laws and regulations in the USA stretching new areas of concern such as the use of cryptocurrencies.
The AMLA coverage is broad and aligns the United States with other countries under an international AML framework. Compliance with new rules is essential to avoid significant consequences for non-compliant organizations.
Here are a few key provisions, including:
· Increased penalties for AML violations.
· New whistleblower incentives and protections.
· New beneficial-ownership reporting requirements.
· Increased regulatory coverage for cryptocurrencies.
The AMLA has adapted AML/CFT laws to address “emerging threats” linked to the illicit use of cryptocurrencies, applying to entities involved in the exchange of unconventional items. This helps to prevent money laundering through cryptocurrency exchanges and custodian services.
WHAT DOES IT MEAN
Under The Financial Crimes Enforcement Network (FinCEN) guidance, virtual currency businesses that essentially serve as money service businesses (MSB) must now register with FinCEN. This rule applies to any crypto entity which could be classed as a MSB defined as:
“a person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States,” operating directly, or through an agent, agency, branch, or office, who functions as, among other things, a “money transmitter.” It extends and includes any business that transmits “currency, funds, or value that substitutes for currency", which includes virtual currencies and cryptocurrencies.
The BSA now also considers antiquities dealers, consultants and advisors as “financial institutions”. The definition of “financial institutions” has been broadened under the AMLA and convertible virtual currency (CVC) and digital assets with legal tender status (LTDA) are monetary instruments. Collection of KYC information needed by verifying and identifying customers in relation to transactions greater than $10,000, or aggregating to greater than $10,000 involving CVC or LTDA that have un-hosted wallets or wallets hosted in a FinCEN identified jurisdiction. This all tracks better crypto transactions.
KYC /AML FOR CRYPTO EXCHANGES
For cryptocurrency exchanges, robust AML programs need to be in place to stay compliant with heightening regulations as well as protect against sophisticated financial crime threats.
The Crypto AML Program should include:
1. Customer Acceptance Policy (CAP)
2. Customer Identification Program (CIP)
3. Ongoing Transaction Monitoring
4. Risk Management Procedures
Non-compliance with AML crypto regulation is a hefty path with examples in the last few years of sky-high fines given to financial institutions not fulfilling their obligations. Having adapted KYC and AML procedures could avoid criminal fines up to $20 Million, prison sentences up to 30 years as well civil penalties up to $65,000 per violation. Traditional KYC and AML services could be extremely expensive for crypto entities, requiring them to pay more to cover for compliance staff and solutions. The fast-changing evolution of crypto assets regulations requires savvy and experienced regulatory and compliance experts fitting all budgets.
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Here at UGR, we will help you navigate with success crypto regulations, compliance and AML/KYC requirements needed in your growth journey. We have some of the finest industry experts covering multiple jurisdictions and work with the best digital asset compliance solutions in the industry to meet all your requirements. Our Compliance As a Service (CaaS) is a monthly consulting subscription plan that allows you to plan, prioritize, and execute against strategic compliance projects and technology initiatives without having to permanently increase the size of your team, offering flexibility for your ongoing needs and having a plan for your budget.