Anti-money laundering and virtual currency service providers

Summary

The Irish Government is advancing a bill which will transpose certain provisions of the AMLD5 into national law. In particular, the bill will bring virtual asset service providers and custodian wallet providers in scope of Ireland’s AML regime.

Background

One of the aims of the AMLD5 is to bring providers engaged in exchange services between virtual and fiat currencies, and custodian wallet providers, within the scope of the EU’s anti-money laundering and countering the financing of terrorism (“AML/CFT”) framework. The reason for this is that, in the EU’s view, the anonymity of virtual currencies allows their potential misuse for criminal purposes.

The Bill

In this regard, the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020 (the “Bill”) proposes to amend the current Irish AML/CTF framework, as set out in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended, the “Principal Act”).

Virtual Currencies

The Bill contains the following new definitions:

• "custodian wallet provider" means an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies;

• "virtual currencies" means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically; and

• "virtual currency service provider" means an entity that provides services in respect of virtual currencies.

The Bill then adds “a provider engaged in exchange services between virtual currencies and fiat currencies”, to the list of designated persons who fall within the Irish AML/CTF regime. This effectively means that custodian wallet providers and virtual currency service providers are subject to the same KYC requirements as traditional financial institutions, including monitored transactions and customer due diligence

The Bill also clarifies that that Central Bank of Ireland will be the competent authority in respect of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers.

E-Money Derogation

The Principal Act current provides for an electronic money derogation from carrying out CDD, provided certain criteria are met (including that the payment instrument concerned is not reloadable and has a maximum monthly payment transactions limit of EUR 250).

The Bill amends this derogation, reducing the transaction limit to EUR 150. The limit for the amount of value that may be stored on the payment instrument in order to be eligible has also been reduced to EUR 150. Finally, the derogation is only available where:

• the issuer of the payment instrument concerned carries out sufficient monitoring of the transactions or business relationship concerned to enable the detection of unusual or suspicious transactions,

• the transaction concerned is not a redemption in cash or cash withdrawal of the monetary value of the electronic money of an amount exceeding €50, and

• it is not a remote payment transaction under the PSD2.