Malcolm Wright, Chief Compliance Officer at Dignex, offers his thoughts on the Fifth Anti-Money Laundering Directive that came into force on January 10th 2020.
“Jan 10th, 2020, is the date when EU Member States have to comply with the 5th Anti-Money Laundering Directive (AMLD) that was passed 18 months ago in 2018. Member states have to pass national legislation that amongst other requirements includes the licensing or authorisation schemes for cryptocurrency exchanges and custody providers. Member states have recently started to issue their licensing and authorisation regimes in this respect including France, Germany, the UK, the Netherlands, Italy and Austria to mention a few. Looking back at the 4th AMLD not all countries implemented in the required time including Greece and Romania and it would appear that the 5AMLD may be no different. One particular challenge is that a high degree of technical knowledge is needed to implement an effective regime for cryptocurrency firms, and some regulators may not yet have such knowledge.
“On the cryptocurrency firm side, some firms have considered the implications of 5AMLD and chosen to cease operations. Others, have cited the 5AMLD and requirements to collect KYC from users as a reason to move operations to jurisdictions that may not have such detailed regulations, in this case Panama. However, 5AMLD does not go as far as last year’s Financial Action Task Force (FATF) recommendations to countries on how to regulate cryptocurrency firms. It is expected that countries should implement regulations to FATF standards within the next 18 months so moving to a less stringent jurisdiction may only provide a temporary relief.
“We are seeing a maturity of the cryptoasset industry, and with it firms that have built compliance into their DNA from the outset will be those that have the ability to flourish. Firms that are now coming to terms with the new reality that AML requirements apply to cryptocurrency firms may struggle if this is something that they have not paid close attention to in the past, particularly if they have a large user base or tight operational margins.”
