New AML rules for cryptocurrencies in the UK

Starting this year, the MLR Amendment modified the AML / CFT regulations in the United Kingdom. For those who are about to start a crypto company it would be useful to keep in mind that this amendment brings MLD5 to the UK’s legislation and changes regulations for transfers.

Introduction

Due to being concerned about money laundering, the British government presented a comprehensive plan aiming at fighting economic crime. The plan offers numerous actions including the ones focusing on cryptocurrencies and is calculated to be applied within 2019-2022.

The new plan is supposed to make AML /CFT rules for crypto companies tighter. Firstly, the new regulations are introduced to keep pace with international standards in the world of finance. Secondly, the amendment’s goal is to react in a comprehensive and thought-through way to the fact that cryptocurrencies are used for illegal activities.

New crypto regulation

Still, certain risks not covered by MLD 5 exist. Therefore, the authorized body decided to ask stakeholders about their views on these issues:

• How MLD5 can be translated into British legislation?
• Is it necessary to oblige individuals seeking to open a British cryptocurrency exchange with extra requirements and license obtainment?

List of changes

After the introduction of the amendment, the scope of MLR became wider. Now everyone applying for a license to become a cryptocurrency exchange operator or to manage electronic wallets in the UK falls under MLR.

Now the term “cryptoasset” is used as an alternative for “virtual currency”. The new term is much broader since it covers:

• Payment tokens – used via DLT platform to obtain a certain product or service;
• Investment tokens – mostly demonstrate gaining specific rights such as owning assets of a company in the UK or rights to have a share of future profits;
• Product tokens – used as a unit for investment or exchange.

License obtainment

Are you planning to obtain a cryptocurrency exchange license in the UK? Then it is crucial to pay attention to regulations and to conduct activities of your company according to the updated MLR regime. The UK financial regulator will monitor how the new plan is implemented by cryptocurrency companies. Moreover, it is planned to forbid cryptocurrency derivatives with the intention of protecting investors from loss.

In case the topic of risk management in investments is significant for you, contact our specialists in COREDO to receive a consultation on possible risks while registering a cryptocurrency company.

When it comes to the requirements stated by the amendment, companies are requested to:

• Perform a risk assessment on provided services, products, and customers base focusing on money laundering;
• Create and follow regularly internal AML procedures;
• Train staff on AML;
• Store annual reports for future audit;
• Conduct customer checks and develop KYC measures.

Setting up a crypto company

According to the new regime, a crypto company needs to receive approval from the regulator to be registered. This requirement applies to:

• Existing cryptocurrency companies – they can continue their activities yet must be registered until the beginning of 2021;
• Companies such as e-wallets, only if their activities involve encryption;
• New crypto companies – those who plan to start functioning in 2020 need to register before the beginning of operating.

Experts from COREDO make sure to keep up with all the news about legislative aspects of cryptocurrency activities in Britain. Make sure to contact us and arrange a consultation on the regulation of cryptocurrencies in the UK. We will be happy to assist you during the registration process of a crypto company in Great Britain or in the countries of the EU.