Cryptocurrency Regulation | AML Guidance for the Crypto- Asset Sector

The Regulation of Cryptocurrency

The Art of Money Laundering
January 15, 2020
How to Ensure your Customer Due Diligence Processes are Client Friendly
January 28, 2020

New Anti-Money Laundering Regulations expand scope of obliged entities to crypto service providers.

The Regulation of Cryptocurrency

New Anti-Money Laundering Regulations, The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into effect on the 10th January 2020 to combat the global issue of money laundering and terrorist financing.

Under this update, the crypto-asset sector is considered a ‘regulated entity’ which is now subject to AML rules and legislation.

What does this mean practically? Crypto companies must register with the FCA, an AML supervisory board. They will also have to conduct a risk assessment, appoint a MLRO, document internal aml policies & procedures including a SAR internal processes & conduct staff AML training.


What you need to know – A quick overview for the Crypto Sector


A good place to start in understanding your general AML requirements is Veriphy’s Pillars of AML Compliance Guide.


Why the Change?

It is becoming much harder for criminals to hide illegal activity via traditional modes of banking; therefore, the anonymity of crypto assets presents an enticing opportunity for crafty criminals to hide illicit funds.

The potential risk of exploitation for the purposes of money laundering within the crypto industry means it is vital for digital financial providers to take responsibility for preventing the illicit flow of illegal funds via their channels.


What's Changing?

The enactment of the new anti-money laundering regulations marks the first time that crypto service providers, such as custodian wallet providers, will be subject to AML legislation.


  • Registration

All UK cryptoasset businesses carrying on activities in scope of the anti-money laundering regulations will need to register with the FCA from 10 January 2020 for the purposes of AML supervision and enforcement.

New cryptoasset organisations that intend to carry on a cryptoasset activity after 10 January 2020 must be registered before any activity can be carried out.

Existing cryptoasset organisations which were already carrying on cryptoasset activity immediately before 10 January 2020 must be registered by 10 January 2021 or stop all cryptoasset activity.

Please see the FCA website for more details


  • Due Diligence

Under the new anti-money laundering regulations, as a regulated entity you now must:

  • Carry out a money laundering risk assessment considering your services, products & customer base
  • Document an AML policy which outlines your internal AML procedures
  • Ensure all staff have undergone AML training and retain an annual record for auditing purposes
  • Adopt a KYC procedure that is risk-based and apply the appropriate level of customer due diligence when needed
  • Adopt measures, when needed, to understand the ownership and control structure of trusts and companies. You must also check trust and company beneficial ownership registers before establishing a business relationship, and to report any discrepancies found to company house

Don't Panic

The new legislation has received backlash from certain crypto service providers, for example Bottle Pay, who decided to shut shop & cited the new law as the reason for its closure.

"The amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”

Whilst many do understandably see privacy as central to the cryptocurrency package, the idea that compliance is an invasive, risk management exercise that creates business obstacles is outdated. Rather, when implemented correctly, it can provide significant benefits to operational procedures.

Identity verification and KYC procedures during client onboarding and beyond do not have to be a costly nor a timely endeavour. For example, many regulatory firms have adopted regtech solutions to enable them to strike the balance between AML compliance and customer experience. With Veriphy’s electronic AML checks processing in just under 3 seconds, regulated entities do not have to choose between compliance and customer satisfaction.

Industry experts have also stated that regulation within the crypto-asset sector will reap long term rewards, "If we want the crypto industry to keep growing and prosper, we need to ensure that a significant portion of the world’s population has access to and faith in it. To make this a reality, virtual assets like Bitcoin must be viewed as secure, easy-to-use and readily available globally. "

Register for free to prepare for the new anti-money laundering regulations.
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