Shearman & Sterling LLP | FinReg | UK Joint Money Laundering Steering Group Consults on Crypto-Asset Exchange and Custodian Wallet Provider Guidance
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  • UK Joint Money Laundering Steering Group Consults on Crypto-Asset Exchange and Custodian Wallet Provider Guidance
    03/18/2020
    The U.K. Joint Money Laundering Steering Group has launched a consultation on its proposed new Guidance on how the U.K. Money Laundering Regulations apply to crypto-asset exchange providers and custodian wallet providers. The proposed Guidance will form a new Sector 22 section in Part II of the existing JMLSG Guidance. Comments on the proposed Guidance should be submitted by May 18, 2020.

    On January 10, 2020, a series of changes made to the U.K. MLRs by the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force. These included an expansion of the scope of the U.K. MLRs to cover crypto-asset exchange providers and custodian wallet providers. The JMLSG’s latest Guidance clarifies the types of service providers likely to be captured by the expanded U.K. MLRs, the scope of regulation applicable to them and an overview of the likely money laundering and terrorist financing risks in the sector. Key risks include: (i) the ability under certain unregulated crypto-asset systems for parties to transact without being fully identified; (ii) the cross-border nature of many crypto-asset systems, which may impact the effectiveness of individual jurisdictions’ AML controls; and (iii) the decentralized and segmented way that many crypto-asset systems are administered. Guidance is also offered on how risks may be managed, including by conducting risk assessments on customers, products and transactions in the crypto-asset sector, conducting customer due diligence and taking risk mitigation measures, such as limiting the number of certain transactions and imposing time delays to reduce the speed of movement of funds.

    View the JMLSG's consultation.

    View details of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019.

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