With close to 2,000 cryptocurrencies such as Bitcoin in circulation, regulating the currency is a key objective of the Fifth Money Laundering Directive
Cryptocurrencies and blockchains are set to be a key compliance theme of 2019, with the upcoming Fifth Money Laundering Directive setting out to regulate cryptocurrencies. While the first and most common cryptocurrency is Bitcoin, there are now close to 2,000 in existence, with the number continuing to grow. This level of growth causes two core issues; namely that cryptocurrencies are currently unregulated and that they can be used to launder money due to the unique way in which they are traded. In addition, some cryptocurrencies are either fake or are used to fuel financial scams.
A lot of the guidance below is taken from the cryptocurrency module in VinciWorks’ anti-money laundering refresher course.
What are cryptocurrencies?
In cryptocurrency, a network of peers maintains a complete history of all transactions, and the balance of every account using that cryptocurrency. This secure system is known as the blockchain.
Section 11 of the Criminal Finances Act 2017 amends the Proceeds of Crime Act (POCA) and affects the regulated sector. The new data sharing regime enables regulated persons to request and share information with their regulated peers, free in most respects from contravening the EU’s General Data Protection Regulations (GDPR). Any disclosure “made in good faith” that does not breach any duties of confidence or “any other restriction on the disclosure of information”.
The purpose is to encourage the sharing of information from different entities in the regulated sector and better enable the collation of multiple reports of potential money laundering into a single Suspicious Activity Report (SAR).
Zamira Hajiyeva spent an average of £4,000 a day in Harrods over 10 years
A woman who spent nearly £16m over a decade in Harrods and once spent £150,000 in a single day became the first target of the recently-introduced Unexplained Wealth Order (UWO). Under this provision of the Criminal Finances Act, which came into force on 31 January 2018, the Azerbaijan international, Zamira Hajiyeva, must give proof of how she and her husband can afford their luxury lifestyle. This includes a £15m home in Central London, an average spend of £4,000 a day at Harrods over ten years and a £10m golf course near Ascot. Should she not have an adequate explanation, she would be the first to be brought to account for unexplained wealth.
The sixth directive may impose a five year minimum prison sentence for serious money laundering offences
The Sixth Money Laundering Directive is already on its way
The Fourth Directive and Fifth Directive are soon to be joined by new EU wide anti-money rules. Despite a fair number of countries still struggling to pass the Fourth Money Laundering Directive; and with the EU only recently agreeing to the Fifth Money Laundering Directive, the EU Commission is going ahead with a Sixth Money Laundering Directive.
Where the Fourth Directive focused on risk and the Fifth Directive focuses transparency, the upcoming Sixth Directive will focus on criminal offences and penalties.
VinciWorks recently hosted a webinar on sanctions that gave guidance on the latest regulations, the affect Brexit will have on sanctions and more, the Iran deal and more. During the webinar, Director of Course Development took several questions on the topic and we have continued to answer the questions. Here are all the questions that have been asked on the topic, along with the answer. If you can’t find the answer to your question here, feel free to tweet us your question.
Frequently asked questions on sanctions regulations
To what extent is the humanitarian sector affected by the sanctions?
Sanctions reporting covers everyone, and under the new legislation dealing with someone under sanction can result in criminal penalties. If in doubt, you should contact the Office of Financial Sanctions Implementation for dealing with anyone under sanction.
Do you have any advice when dealing with a US Specially Designated National (SDN) when an entity isn’t sanctioned by an individual?
There could be an issue in paying an entity if the SDN is a beneficiary or beneficial owner. You should check the specific regulations of the OFAC sanctions on the individual and consider applying for a license if necessary.
Staff should feel comfortable raising any suspicions of money laundering without fear that doing so could affect their role
The Money Laundering Regulations 2017, which transpose the Fourth EU Money Laundering Directive into UK law, came into full force on 26 June. The Fourth Directive includes some fundamental changes to the anti-money laundering procedures, including changes to customer due diligence, a central register for beneficial owners and a focus on risk assessments. For example, there will no longer be automatic exemptions from conducting client due diligence.
Further, the UK parliament has enacted a piece of sanctions and money laundering legislation designed to Brexit-proof the UK’s ability to implement international and European sanctions. The Sanctions & Anti-Money Laundering Act 2018 gives the UK new powers regarding sanctions and money laundering. For example, the UK can make, suspend and revoke sanctions regimes which can include broad measures including shipping, trade and even airspace restrictions, in addition to financial sanctions and travel bans.
VinciWorks has created a money laundering whistleblowing policy template that can easily be edited to suit your organisation and include the appropriate contact people.
Download policy template
When your organisation is using third parties, it is essential to complete your own due diligence equal to the risk faced from the said relationship. With businesses and partnerships around the world growing, it is essential to make sure all your relationships and third parties are legal and legitimate. VinciWorks’ guide to risk based third party due diligence will give you a clearer understanding of how to conduct a detailed and genuine risk assessment.
Under the Fourth Money Laundering Directive, CDD is required by anyone trading goods in cash with a value over €10,000, down from previous amount of €15,000
Ensuring your staff are able to carry out effective customer due diligence goes a long way to ensuring your staff and clients are not are not facilitating money laundering. Such processes to be aware of and understand include submitting a suspicious activity report (SAR), understanding what is required to take a risk based approach and the supporting documents that should be requested from clients. Here is some guidance to carrying out customer due diligence and how to deal with potential red flags.
The guidance is taken from our interactive e-learning course, Anti-Money Laundering: Know Your Risk. You can demo the course for free here. The course is in line with the Fourth Money Laundering Directive and will be updated when the Fifth Directive comes into force.
What is customer due diligence?
Customer due diligence is the process of identifying your customers and checking they are who they say they are. In practice this means obtaining a customer’s name, photograph on an official document which confirms their identity and residential address and date of birth. There are three levels of customer due diligence: standard, simplified and enhanced.
The Fifth Money Laundering Directive has been passed. Here’s what you need to know
The Fourth Money Laundering Directive may have only recently been implemented into national laws around the EU, but on 19 April 2018, the European Parliament announced it had adopted the Fifth Anti-Money Laundering Directive. On 19 June 2018 the final text was published. EU members will have 18 months to transpose the Fifth Directive into national law. However, some countries have already done so.
The new allows for the UK to add or remove people, entities and organisations from targeted sanctions list if there are reasonable grounds to suspect involvement in activities that can trigger sanctions
The UK parliament recently enacted a new piece of sanctions and money laundering legislation designed to Brexit-proof the UK’s ability to implement international and European sanctions. To help organisations comply, VinciWorks has released a brand new scenario based training course Sanctions: Know Your Transaction. Following the success of our anti-bribery and anti-money laundering training, this course drops users into a set of immersive scenarios to test their knowledge, understanding and ability to comply with the new sanctions law.