Digital currency exchange – quick guide to compliance with the Anti-Money Laundering and Counter Terrorism Financing Act13 June 2018 Topics: Banking and financial services, Capital markets, Compliance and corporate governance, Intellectual property and technology
Digital currency exchange providers will be forced to enrol and register with Australian Transaction Reports and Analysis Centre (AUSTRAC) under new laws that came into effect on 3 April 2018.
The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017 (Cth) (the Amendment Act) aims to address the risks of crypto-currency transactions being used to facilitate money laundering and terrorism financing through amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the Act), which impose strict new obligations on digital currency exchange providers.
The registration process
The new registration requirements apply to businesses that provide digital currency exchange services in Australia, such as businesses that exchange digital currency for money (e.g. Australian or foreign currency) or vice versa.
AUSTRAC has confirmed that existing digital currency exchanges and new entrants to the market between 3 April 2018 and 14 May 2018 may carry on their digital currency exchange businesses without formal registration approval provided they applied for registration with AUSTRAC by 14 May 2018.
From 15 May 2018 onwards, all new digital currency exchange providers must be registered with AUSTRAC before offering their services on the market.
Criminal offence and civil penalty consequences will apply for unregistered operations.
Other compliance requirements
In addition to the registration requirements, the new obligations under the reformed Act will require digital currency exchange providers to:
- identify and verify the identities of their customers through appropriate customer due diligence;
- monitor customers based on their risk of money laundering or terrorism financing;
- report suspicious matters and transactions involving fiat currency that exceed AUD$10,000 to AUSTRAC;
- adopt and maintain an anti-money laundering and counter-terrorism financing program (AML/CTF program); and
- keep records of transactions, customer identification processes and the AML/CTF program for 7 years.
In recognition of the onerous nature of these new obligations, the Minister has stated that enforcement action will not be taken against digital currency exchange providers that take all reasonable steps to comply with the obligations before 2 October 2018.
To demonstrate that ‘all reasonable steps’ have been taken, digital currency exchange providers will need to:
- comply with all requirements as soon as practicable;
- closely assess the money laundering and terrorism financing risks of customers;
- have a clear plan and act to achieve full compliance with the new laws;
- ensure that their board oversees and progresses the AML/CTF compliance program; and
- allocate sufficient resources to comply with the reformed Act.
For further commentary on setting up a digital currency exchange, please read our legal alert ‘So, you’re thinking about setting up a digital currency exchange?’.
If you would like more detailed advice about your new compliance obligations, please contact a member of our team.