AMLD5 - The Most Important Changes for Crypto Services

On April 21, 2020, the Senate approved the bill that implements the amended fourth anti-money laundering directive (AMLD5) in the AMLD. This change has major consequences for crypto companies, among others, who now also have to comply with the guidelines of the AMLD..

Enforcement

Companies that offer services for exchanging virtual money (cryptos) and ordinary money (fiduciary money) and companies that offer crypto custodian wallets are also covered by the Money Laundering and Terrorist Financing (Prevention) Act (AMLD) as of 21 May 2020.

Cryptos are very vulnerable to financial crime and money laundering. Until now there was little supervision of the trade in cryptos, but this change in law has changed that.

Why this change?

Cryptos are vulnerable to financial economic crime. That is why it is important that there is now also integrity supervision at these companies. In concrete terms, the supervision means that companies that offer services for exchanging cryptos and ordinary money and companies that offer crypto custodian wallets must comply with the requirements of the Money Laundering and Terrorist Financing (Prevention) Act (AMLD), that they must register with DNB and that the directors, co-policymakers, supervisory directors and holders of a qualifying holding (shares ≥ 10%) are tested. The Dutch Central Bank also ensures that companies comply with the rules on money laundering, terrorist financing and sanctions legislation. Companies that do not register with DNB are no longer allowed to provide services for exchanging cryptos and ordinary money and are no longer allowed to offer custody wallets.

The rules of the AMLD and Sanctions Act now also apply to providers of crypto services.

What rules apply?

This mainly concerns the rules from the AMLD and the Sanctions Act. The AMLD sets the following rules:

Integrity risk analysis:

Under the AMLD, providers of crypto services are now obliged to draw up an integrity risk analysis and to keep this analysis up to date. This process consists of two steps: identifying potential risks and analyzing and determining the nature and magnitude of these potential risks.

Integrity and controlled business operations:

According to the AMLD, providers of crypto services must guarantee an honest and controlled business practice. This also includes a clear division of tasks and governance.

Customer Due Diligence:

The purpose of customer due diligence is that the institution knows with whom it is doing business, what the relationship is used for, and that the institution continuously monitors this in a risk-based manner. The intensity of the customer due diligence is risk-based and is determined, among other things, by the risks associated with certain types of customers, products, services, delivery channels, transactions and countries or regions.

Transaction monitoring:

Institutions that fall under the AMLD must continuously monitor the business relationship and the transactions carried out (or intended) during the term of this business relationship. In this way, institutions can ensure that the transactions executed correspond to the institution's knowledge of the client and his risk profile, including, if necessary, an investigation into the source of the resources used in the business relationship or transaction.

Duty to report:

Institutions that fall under the AMLD are obliged to take measures to prevent money laundering and terrorist financing and, in certain cases, to report them to FIU the Netherlands.

The Sanctions Act means that it must be checked whether the client is on a sanctions list. Various sanctions may then apply:

• An order to freeze the assets of designated persons or organizations;
• A prohibition on directly or indirectly making resources available to these persons or organizations;
• A prohibition or restriction on the provision of financial services.

To prevent violations of sanctions regulations, relationships must be screened at the outset and periodically using the sanctions lists. When there is a match, it must be determined which injunction or prohibition applies.

CDD On Demand easily performs these checks for you

CDD On Demand

To comply with the new legislation and regulations, SCOPE FinTech Solutions has developed the CDD On Demand solution that can save you a lot of time in the implementation of the various rules. For example, a complete check can easily be carried out on the basis of a name only on sanction lists, PEP control and negative media. There is also the option to enable continuous monitoring with which your clients are checked daily on a number of lists. At the end of the check, a certified report is ready with the checks performed for the administration.

Better to be safe than sorry!