Bulgarian Community
Largely in effect since January 10, 2020, the 5th Anti-Money Laundering Directive (Directive (EU) 2018/843) aims to combat terrorist financing and money laundering, improving on previous directives by ensuring increased transparency in the financial and economic world – also in regard to virtual currencies.
Since such so-called cryptocurrencies enable rapid transfers away from strictly regulated and supervised financial institutions, and are therefore easy to misuse for money laundering and terrorist financing, the 5th Anti-Money Laundering Directive has defined the term “virtual currency” for the first time, allowing for a tightened European regulatory framework with a special focus on Bitcoin, Ether and Co.
These regulations, made on the basis of the previous 4th Anti-Money Laundering Directive, have created a legal framework for the establishment of a register where the beneficial owners of a large number of legal entities will be published. Such beneficial owners are, for example, natural persons who hold an interest of more than 25% in a company, or natural persons who exercise control over management. Companies already in the register of companies or the register of associations are exempt from the reporting obligation – such as limited liability companies, if all shareholders are natural persons.
With the implementation of the 5th Anti-Money Laundering Directive, companies from the “crypto sector” are now compelled to publish and report data on beneficial owners: This includes companies that offer the exchange, transfer, issuance and sale of virtual currencies
or provide customers with electronic purses (wallets) to hold, store and transfer virtual currencies.
Therefore, virtual currency service providers are henceforth obliged to implement due diligence measures regarding money laundering and terrorist financing. In particular, the companies concerned must establish the identity of customers and their beneficial owners, obtaining or verifying information on the source of funds.
Furthermore, due diligence obligations also require that information on the purpose and intended nature of business relationships must be obtained and monitored. Continuous monitoring should ensure that transactions are consistent with the stated source of the funds used. If suspicion of money laundering arises in the course of a check, it must be passed on to the Anti-Money Laundering Reporting Office.
In addition to compliance with due diligence requirements, as of January 10, 2020, registration with the FMA (Austrian Financial Market Authority) is mandatory, accompanied by information demonstrating a corresponding suitability for the respective activity.
Such suitability must be proven by a description of the intended business model and an internal “money laundering control system.” If no such registration is made, the FMA will prohibit a company’s activity. In addition, the FMA may impose an administrative fine of up to €200,000.
Hopefully, the establishment of compliance management and mandatory registration with the FMA will create maximum transparency among crypto companies and prove to be an efficient measure in the fight against money laundering and terrorist financing – but only time will tell.
