In 2021, we entered a new decade where online payments and digital assets gained much greater significance, changing people’s lives and their views on finance. While the narrative of controversy and danger surrounding the crypto field is still going strong, many new clients are eager to join the club and buy cryptocurrencies for trading, holding, and transacting. With constantly increasing rates in the cryptocurrency market, the number of criminals involved also grew. In these circumstances, further development of stricter frameworks seems logical. However, entrepreneurs and mainstream users are worried about what these initiatives will mean for their daily operations. I decided to evaluate the possible hardships.
A cold calculation
The changes brought by a new set of rules or 6AMLD will undoubtedly affect businesses across many countries, but what should we summarize from an extensive amount of information on the web?
In January last year, the EU released its Fifth Anti-Money Laundering Directive to tackle the problem of transparency, combat fraud, money laundering, and cybercrimes more effectively. Summing up the changes, we see that the 5AMLD extended the scope of customer due diligence verification, introduced domestic and politically exposed persons, extended the creation of central registrars of beneficial ownership, as well as Anti-Money Laundering, checks to majority-owned subsidiaries outside the European Union.
Having arrived after a few European banking scandals that have fueled questions about the effectiveness of the EU’s approach to AMLD, the newly updated 6th framework is designed in a way to counter cybercrime and the financing of terrorism even more efficiently. We observe the need for more clear incentives for the dedicated adoption of AML requirements in the private sector.
I am sure that regulators and governments are looking for better ways to protect customers and the 6AMLD comes as a part of an increasingly strict EU approach on AML, with more changes expected in the next few years.
Businesses need to be ready to adapt for further change, maintaining the agility to properly respond to the challenges. Long story short, the 6AMLD looks like a natural development of the previous AMLDs that aims to address unexpected issues and deal with the existing loopholes.
There is no surprise that increased pressure was applied because many areas of criminal activity beyond drugs, and human and weapons trafficking businesses bring substantial income streams nowadays. In the latest decade, the rise of cybercrimes and environmental and wildlife harm became even more noticeable. Some action needed to be taken with a more direct vector.
Fighting cybercrime to eradicate money laundering has become extremely important since emerging digital currencies represent new risks and challenges. Among many new points, it’s worth highlighting the main changes of AMLD6. This directive:
- Provides more precise definitions of crime and its penalties;
- Extends criminal liability to legal persons and companies with stricter punishments;
- Businesses will be required to cooperate in the prosecution of money laundering-related crimes;
- Companies will take responsibility for protecting customers from cybercrime and combating terrorist financing.
So one of the objectives of the 6AMLD is the updating of predicate offenses related to money laundering, providing clear definitions of each specific crime. The changes focus on 3 main areas for existing regulated businesses: cybercrime, cooperation, and criminal liability respectively.
First of all, cybercrime has never been mentioned in any previous AMLDs, and it has become the main target of regulators, enabling businesses to pinpoint and tackle any potential money laundering activity more efficiently than before.
Next, businesses will also be required to cooperate in the prosecution of money laundering-related crimes under this new AMLD. For the first time ever, companies, or “legal persons,” can be held accountable for the crimes. This means that if an individual within your business of significance — classed as a “legal person” — has failed to prevent criminal activity from happening, then that person and your business can be punished for the act. Tough times, tough measures.
Highlighting the aftermaths
There are different points of view expressed when new changes step in. However, the 6AMLD will mean that businesses will have fewer legitimate excuses if they are found to have even inadvertently enabled money laundering.
Fortunately, armed with the knowledge of what’s coming, businesses should strive to implement robust and automated Know Your Customer and AML verification to perform more identity checks than previously required. The main question is considering what alternatives exist that can help to achieve compliance and effective risk management at the lowest cost possible. With the penalties for failure rise sharply, having better platforms should be regarded as a profitable investment rather than spending.
While researching the market, I noticed that some platforms have prepared for increased regulations in advance. Nowadays, there are hundreds of active crypto exchanges that facilitate operations with digital assets. After some checking, I found out that reputable trackers Coinmarketcap and Coingecko estimate that there are more than 300 active platforms of all types active.
With so many competitors in this field, I am proud to state that STEX is still one of the most successful players in the EU league currently. Our fully compliant spot crypto exchange support all European AML standards, offering convenient solutions and extensive trading pairs to provide an unmatched trading experience. STEX is currently supporting more than 400 different cryptocurrencies and users can buy digital assets using Visa and MasterCard and SEPA, Bancontact, iDEAL payment systems. The platform operates under the license of the Estonian regulator and complies with KYC / AML procedures. Moreover, STEX clients are verified by Cryptonomica and Fractal services.
At the moment, there is no ideal jurisdiction for cryptocurrency business. But the Estonian authorities are consulting and communicating with industry representatives, which is an important sign. This is very different from countries in which the regulator is present just for the show. The stricter regulations in 2020 have revitalized the market and eliminated dormant companies. The process was not painless, but a lively business continued to work in the country.
I am confident that industry regulation is necessary to protect users of crypto exchanges. STEX has taken a pro-compliant position since its inception. We comply with all the regulator requirements and maintain active communication with the Estonian financial intelligence unit for detailed explanations of the specifics of this market.
After all, compliance with regulatory requirements and the reputation of the crypto exchange allowed STEX to enter the BVC WG for consultations with the European Commission on MiCA.
What is the conclusion of this extensive analysis? In the fast-developing world, when technology reshapes the financial field so fast that market participants such as companies and watchdogs are unable to react on time, the emergence of strict regulations is inevitable at some points. I honestly believe that the future of the digital asset industry will be shaped by legal compliance, and no matter if you are a beginner or sophisticated crypto user – choose regulated platforms, start walking the safe road from now on.
Author: STEX CEO and founder Vadym Kurylovych