In 2020, crypto service providers will fall under a new supervisory regime. This is due to a new European anti-money laundering directive, better known as AMLD5. Parties wishing to be active in the Netherlands in crypto trading or otherwise providing services will be required to register with De Nederlandsche Bank (DNB). But what does this registration requirement mean, to whom does it apply and from when exactly?
author: Gijs van Schalkwijk
Money laundering is and remains a major problem. In the first place for the financial system and consequently for the entire society. A lot of money is being put into finding ways to combat this phenomenon, but it is not yet easy. To specifically combat money laundering through crypto money, the AMLD5 (anti money laundering directive 5) has been established. This directive brings virtual currencies like bitcoin under the scope of European anti-money laundering regulations.
The Netherlands already has the Money Laundering and Terrorist Financing (Prevention) Act (Wwft). The Wwft includes a registration requirement for certain crypto-service providers, in Chapter 3A to be exact. Gijs van Schalkwijk of Charco & Dique addresses three relevant questions about this development.
The registration requirement applies to crypto service providers offering custody wallets and exchange functions for virtual currencies. Therefore, it is important to determine exactly what activities qualify as 'offering custodial wallets' and 'offering exchange functions'. A "custodial wallet provider" is an "entity that offers services to secure cryptographic private keys on behalf of its clients to hold, store and transfer virtual currency.
No explicit definition is given in the law for the activity of "offering an exchange function. For the interpretation of this definition, one can look at the provision in the law that describes the parties to whom the Wwft applies. Therein, "natural persons, legal persons or companies that professionally or commercially offer services for the exchange between virtual currency and fiduciary currency "are named as parties to whom the Wwft applies. These are therefore providers that allow the exchange of fiduciary currency (euros, dollars, etc.) to virtual currency, and vice versa. Thus, parties that only exchange virtual currency to virtual currency do not qualify as providers of an exchange function.
Anyone who qualifies as a crypto service provider and operates (or intends to operate) in or from the Netherlands is required to register with De Nederlandsche Bank (DNB). Without registration, offering crypto services in or from the Netherlands is not allowed. This means that foreign parties wishing to enter the Dutch market also have a registration requirement. Dutch parties serving only foreign customers also have a registration requirement.
The file that must be submitted to DNB to obtain registration includes:
General company information (incl. articles of incorporation and extract from the Chamber of Commerce);
A developed business plan (incl. the strategy, an overview of activities and a SWOT analysis);
An elaboration of governance (incl. organizational structure and transparent control structure);
An elaboration of controlled operations (incl. compliance and audit, reporting procedure, outsourcing and training & education);
An elaboration of the integrity management (incl. a systematic integrity risk analysis, customer due diligence policy, policy regarding the prevention of conflicts of interest, indication of the policymaker who is specifically charged with the responsibility for compliance with the Wwft and Sanctions Act 1977).
One file per (co-) policymaker to be reviewed for suitability and reliability.
The regulator shall register a crypto service provider within two months of receipt of the application for registration. However, if information is missing from the application, the deadline is suspended until the application is complete. Only when the complete file is complete will the DNB consider the application. To ensure the quality of the application, DNB advises crypto service providers to seek advice from a consultant.
The obligation to register applies from the entry into force of the AMLD5 implementation law. This law should have entered into force on January 10, 2020, but is currently still pending in the Dutch Senate. From its entry into force, new crypto service providers will no longer be allowed to start offering services without a registration.
A transitional arrangement applies to crypto service providers who were already offering services before the effective date. Those providers have a period of six months to register with DNB. This period will start at the time of entry into force. Providers who have not (yet) registered after six months must suspend their services. During the transition period, the provider must still comply with the other obligations of the Wwft, such as client screening, transaction monitoring and the duty to report.
source: Banks.com
