Hamraj Kang of Kangs Solicitors discusses the 5th Money Laundering Directive (5MLD) with particular attention to cryptocurrencies, the reasons why the 5MLD now encompasses cryptoassets and the likely change that it will have on the anti-money laundering landscape.
Kangs Solicitors regularly advises corporate and individual clients in relation to their obligations under the anti-money laundering regulations.
We appreciate that individuals and organisations involved with cryptoassets will require specialist legal advice and assistance.
We are experienced in cryptoassets investigations as well as any ensuing civil, regulatory or criminal proceedings.
We advise in relation to all aspects of digital currencies and cryptoassets including advice to Cryptoassets Exchange Providers and Custodian Wallet Providers. Please click here for details of the work undertaken by our team of lawyers in this area.
For an initial no obligation discussion, please call our Team at any of our offices detailed below:
The 5MLD | Kangs Cryptocurrency Solicitors
The 5MLD came into force in January 2020 in the UK and EU.
The need for change has been driven by the fact that since the 4th Money Laundering Directive was implemented in 2017, the world has changed significantly with a global increase in money laundering activity.
Financial criminals have developed novel ways to circumvent existing anti-money laundering regulations and the authorities needed to ‘catch up’ and strengthen the regulatory and enforcement framework.
Technology has played a major part with the exponential growth in cryptocurrencies and cryptoassets. Combined with the growth in terrorist financing and corruption, it is easy to see why law enforcement agencies needed to act to restrict the opportunities to launder money that either assists unlawful activity or is derived from such unlawful activity.
Does the UK have a Problem? | Digital Currency Solicitors
The UK is a major financial centre receiving significant inbound investment. However, it is not always easy to identify the source of such inbound investment and the use of digital currencies makes the job even harder for law enforcement agencies.
The 5MLD recognises that, rather than just focusing on the traditional professional and financial sectors, the sphere of regulation needs to be increased to cover ‘new’ or ‘emerging’ sectors if an effective joined up approach is to be taken to tackle the issue of money laundering.
Money Laundering Issues with Cryptocurrencies | Kangs Solicitors
Cryptocurrencies use blockchain technology and the markets have been unregulated to date which makes detection of trades and the identity of traders virtually impossible.
It is this anonymity that has made digital currencies attractive to financial criminals and fraudsters.
The 5MLD seeks to remove this cloak of anonymity by bringing those involved in the cryptoassets and digital currency worlds firmly into the regulated sector.
Obliged Entities | Kangs Money Laundering Defence Solicitors
So, what’s new in the 5MLD?
The 5MLD has extended the regulations to cover new sectors that now become ‘obliged entities.’ Such sectors may have been targeted and exploited by money launderers in recent years and include:
- Art Dealers – where the transaction or series of transactions is 10,000 Euros or more
- Letting Agents – where the monthly rent paid or received is 10,000 Euros or more
- Cryptocurrency Exchange Providers
- Custodian Wallet Providers.
Cryptoassets Exchange & Wallet Providers | Kangs Solicitors
Cryptocurrency exchange providers and custodian wallet providers are now obliged entities and, therefore, must abide by the same Anti-Money Laundering Regulations as traditional financial and professional service providers.
A cryptocurrency exchange provider is a business that exchanges a virtual cryptoasset into money or to other virtual assets.
A custodian wallet provider stores and administers the virtual cryptoassets on behalf of the beneficial owner/customer.
The New Regime | Kangs Cryptocurrency Disputes Solicitors
The exchange providers and the wallet providers will need to implement additional procedures in order to comply with the 5MLD. The additional procedures are considerably more onerous than the unregulated regime that has been in operation to date and it will be interesting to note how the sector copes with the new requirements.
The most important changes include:
- the need to conduct and record ‘Know Your Client’ Checks on customers
- the need to conduct ‘Due Diligence’ Checks on customers
- when appropriate, to submit Suspicious Activity Reports (SARs) to the National Crime Agency (NCA)
- compulsory registration with the Financial Conduct Authority (FCA) within a certain time limit in order to prevent forfeiture of the right to remain in business
- the obligation to provide on demand data sharing with law enforcement agencies which means customers’ names and addresses will need to be disclosed.
The aim of the above regulations is to ensure that a transaction is no longer anonymous for a customer. The law enforcement agencies are entitled, under the data sharing provisions, to demand immediate information from the regulated businesses.
How Can We Help? | Bitcoin & Digital Currencies Solicitors
We are able to field a team of civil and criminal law specialists to assist you.
We have longstanding relationships with the leading barristers and QCs in the country in this specialist area of law.
The criminal law areas we can assist you with include:
- investigations by any law enforcement agency such as the FCA, HMRC and the SFO.
- representation and attendance at any Dawn Raid and execution of a search warrant.
- advice on the legality of a search warrant
- negotiating with a law enforcement agency on your behalf
- representation at interviews and meetings with the law enforcement agency
- representation in any ensuing criminal proceedings such as a prosecution for serious fraud, money laundering or regulatory breaches
The civil and regulatory law areas we can assist you with include:
- advice and assistance in relation to FCA regulations and compliance
- civil fraud action to trace and recover funds invested innocently in cryptoassets due to fraud
- contractual disputes involving cryptoassets, exchange providers and wallet providers
- assistance with HMRC investigations and tax treatment of cryptocurrencies
- insolvency issues arising from cryptoassets and cryptocurrency.
A Reputation Built on Expertise and Trust | Cryptoassets Solicitors
Since 1997 we have been here to assist our clients and to provide positive solutions to whatever issues that may arise for individuals and businesses in new and developing sectors.
We instil a sense of calm in our clients, provide frank and forthright advice, and above all, provide our clients with practical solutions.
How Can I Contact You? | Kangs Solicitors
Hamraj Kang leads an award-winning team of solicitors nationally reputed for its excellence.
We welcome new enquiries by telephone or email.
Our team of lawyers is available to meet at our offices in London, Birmingham or Manchester or, alternatively, we are happy to arrange an initial no obligation meeting via telephone or video conferencing.
For initial enquires please contact: