Everybody is Freaking Out About The 5AMLD. Is Mandatory Verification as Scary as it Seems?
Starting from January 10, 2020, the Fifth Anti Money Laundering Directive (5AMLD) takes effect. The Directive contains requirements for the mandatory verification for all cryptocurrency platforms clients following the KYC and AML standards, all users who make cryptocurrency transactions must pass verification. Many users are seriously “scared” of verifying their accounts according to some common myth around the cryptocurrency market, and now we’ll #BUST them. - Cryptocurrencies are not regulated #busted Offer and Sale of digital assets by “virtual” organizations are subject to federal securities' law. Issuers of a ledger or blockchain-based securities are required to register with SEC and Financial Industry Regulatory Authority. In 2019, all anonymous cryptocurrencies were officially banned in Japan. The need to implement such a ban is being discussed in other countries like France and Italy. - Sharing personal and bank information on the internet is not safe. #busted EXMO Cryptocurrency Platform stores the user’s personal information on the encrypted servers, and no company employee has access to the original documents, except for a certified AML officer. For the verification the team uses copies with the protective watermarks, which do not allow reuse of the submitted documents. So, verifying your identity just enhances the protection of your data and funds. - I can be fined for using cryptocurrencies Come on, this is such a myth that even doesn’t need to be #busted. - Crypto can is often used for criminals because it’s anonymous #busted This is a common opinion in media. I hope you are not using bitcoin for any illegal payments, because … Crypto transactions are traceable and public! All the cryptocurrency transactions are transparent and highly traceable. You can see how many funds have moved from one wallet to another, and even the amount of crypto in an online crypto-wallets. - Trading is a hard complicated process #busted Do you know exactly how mobile phones, computers or the Internet works? Think about crypto in the same way. You don't have to understand the underlying technology completely, but you can learn to benefit from Trading by following the best practices. Let’s get back to the main article’s idea, Today we will outline the following questions:
- What is the KYC/AML policy in general?
- What is 5AMLD?
- How it will affect the crypto market?
- KYC/AML policy: general requirements and high importance.
2. The Fifth Anti-Money Laundering Directive (5AMLD) compliance is easier than it seems. So, what is 5AMLD?The Fifth Directive of the European Commission Against Money Laundering (AML) was issued in May 2018, it deals with the regulation of cryptocurrencies. New rules are more strict, due to ensuring the transparency of transactions conducted by anonymous parties using cryptocurrency trading platforms. EU member states are required to implement the amended rules in their national laws no later than January 10, 2020. According to the EU statement, it must:
- Enhance transparency by setting up publicly available registers for companies, trusts, and other legal arrangements;
- enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
- limit the anonymity related to virtual currencies and wallet providers, but also for prepaid cards;
- broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
- set up central bank account registries or retrieval systems in all Member States;
- improve the cooperation and enhancement of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank.
- A legal definition of virtual currencies, namely: ”a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”
- Platforms holding customers’ private keys are considered “obliged entities”, and consequently need to follow the same compliance requirements as traditional financial institutions under 4AMLD. As a result, all relevant cryptocurrency platforms will be required to perform customer due diligence and submit suspicious activity reports. Moreover, they will have to be registered with the appropriate national authorities.
- 5AMLD significantly increases the power of the Financial Intelligence Unit (FIU), which will have the mandate to obtain the addresses and identities of token holders. How this will be achieved isn’t explained and it is still unclear how it would be possible.