On 27 July 2020, the Joint Money Laundering Steering Group (‘JMLSG’) published two new pieces of guidance relating to Anti-Money Laundering (‘AML’) which have now been incorporated.
The new guidance comprises of a new annex within Part I: Annex 5-V on Pooled Client Accounts (‘PCAs’), and a new sectoral piece within Part II: Sector 22 Cryptoasset exchange providers and custodian wallet providers. There is also a minor amendment to paragraph 5.3.53 within Part I.
PCA Guidance
The additional guidance concerning PCAs outlines factors firms should take into account when considering whether the provision of PCAs impacts the customer’s Money Laundering (‘ML’) or Terrorist Financing (‘TF’) risk. Factors to consider when considering the level of risk include whether the PCA serves a limited, domestic purpose and if the customer is subject to the AML or equivalent regulations.
The new guidance proposed by the JMLSG relates to identifying risks, the requirements of written agreements and the different due diligence processes which are needed when a firm opens and administers PCAs for clients.
The guidelines also outline the due diligence process required as part of a firm’s risk assessment of their customers. The firm should consider whether the provision of PCAs impacts the customer’s ML/TF policy and whether specific mitigations to risks have been met.
Cryptoasset Update
The new guidance on Cryptoasset exchange providers and custodian wallet providers, it explains how the AML Regulations are relevant to the sector.
The new guidance outlines specific high-risk and low-risk factors firms are required to consider, including the ability of users to make or accept payments in money from/to unknown or unassociated third parties. The guidance also sets out risk management processes concerning customer, product, transaction, geographical and delivery channel risks. Other requirements outlined include record keeping, ongoing monitoring and customer due diligence processes.
Measures to mitigate risks are also included in the guidance, including the introduction of transaction limits, including limits on the total value of privacy coins that may be held, stored, transferred or exchanged; the use of time delays before certain automated and manual transactions to restrict the rapid movement of funds; the prohibition of transfers to third parties where details relating to the transaction, such as names involved, do not match and the carrying out of customer due diligence, know-your-client checks, blockchain analysis, properly evidencing the source and destination of the funds and complying with ongoing monitoring obligations.
AML and Laven
At Laven, our consultants are on hand to help identify the actions your firm needs to take to ensure you are compliant with new regulations and aware of all the risks outlined in this report. Whether this is through assisting with new policies and procedures that need to be put in place or providing online/in-person training for staff to make them fully aware of the regulatory burden.
Laven has also built Laven Tech, a unique Regulatory Technology (RegTech) solution that leverages advanced technology combined with our vast subject matter expertise. Our RegTech solution is designed to assist fund managers, service providers and investors to meet today’s growing demands.
