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The latest iteration of the anti-money laundering directive includes cybercrime for the first time. Here’s what the June 3rd deadline means for crypto, compliance, and customers.
Cryptocurrencies are trending again in 2021, with Bitcoin leading the way, pushing beyond what years ago seemed like an impossible valuation of $60,000. While that particular social media darling has taken a bit of a beating at the time of this article (May), we’re still seeing a seemingly ever-growing mainstream adoption of crypto.
But with increased popularity comes more players and new risks. This has raised concerns among financial institutions and governments, leading to the advancement of regulatory frameworks that are designed to prevent fraud, money laundering, and terrorist financing. Because a major roadblock to the successful mass adoption of cryptocurrencies and blockchain revolves around regulatory compliance, we’re now looking at a sixth, updated version of the Anti-Money Laundering Directive (AMLD).
While we have come a long way since the first iteration of the AMLD in 1991, it is with 6AMLD that we’re now seeing a clearer and more structured focus on the world of crypto. The pressure to comply with Know Your Customer (KYC) processes is now on digital wallet providers and crypto-asset exchanges across the globe.
Important changes affecting crypto
With the introduction of 6AMLD we’re seeing cybercrime featured in an anti-money laundering directive for the very first time. This most recent update, which will go into effect on June 3, will be applicable to all cryptocurrency exchanges, custodians, and any obliged entities set out in prior AMLDs. While exchange providers and other players in the space may have faced challenges related to customer due diligence and reporting requirements when 5AMLD was first introduced, the demands due to 6AMLD are even more burdensome.
In an effort to harmonize the law across the EU, 22 predicate offenses are being introduced. The list includes previously mentioned (and new) offenses like cybercrime and can be found in its entirety below.
Participating in an organized crime group or racketeering
Human trafficking and migrant smuggling
Illicit trafficking in narcotic drugs and psychotropic substances
Illicit arms trafficking
Illicit trafficking in stolen and other goods
Counterfeiting and pirating products
Kidnapping and hostage-taking
Robbery or theft
Tax crimes relating to direct and indirect taxes
Insider trading and market manipulation
The sixth iteration of the anti-money laundering directive has also extended liability to include legal persons and individuals. With this update, corporate entities can be held liable for money laundering offenses and will now have to be proactive with compliance. The days of shifting blame onto rogue employees will be long gone, as anyone who is found aiding and abetting, inciting, or attempting any of the above-mentioned offenses, willingly or not, will be held directly accountable. Simply put, any legal person that aids in the criminal activity will likely be handed a sentence henceforth.
Lastly, this new directive also imposes more severe punishments for money laundering, with the maximum prison sentence increasing from one to four years. This would in certain cases be in addition to heavy fines and/or the permanent closure of the affected business. This stricter approach was designed to better deter criminal activity.
Are you ready for 6AMLD?
Cryptocurrencies and other digital assets are still in their infancy however maturing quickly. Proper regulation will play an essential part in the future of the sector and the introduction of 6AMLD will serve as an important milestone. As obligated entities, cryptocurrency exchanges and custodian wallet providers must have robust controls in place to ensure that they’re complying with money laundering rules.
The new directive was transposed into EU law at the tail end of last year, and full compliance will be required by June 3, 2021. If you are unprepared for the changes, need guidance, or have compliance-related questions, we’re here to help you.
If you have yet to take action and need user-friendly, quick, and efficient solutions, we can also provide. ZignSec offers expert and competent support, and can assist you in adapting to new regulations, such as 6AMLD. We’re ready to help you update and modernize your user relationship processes and fight against money laundering, in addition to reducing bureaucracy and costs related to customer relationships.
We’re ready to use our extensive knowledge of cybercrime and AML to enable the safe growth of the cryptocurrency sector.