Following a consultation which concluded on 18 May 2020 (blog here), on 28 July 2020 the Joint Money Laundering Steering Group (JMLSG) published a new chapter to be added to Part II of its anti-money laundering (AML) and counter-terrorist financing (CTF) guidance for the financial services sector.
The new chapter (referred to as Sector 22) has been finalised to contain sectoral guidance relating to cryptoasset exchange providers and custodian wallet providers and takes account of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, which came into force on 10 January 2020.
The aim of the new guidance is to support newly obliged cryptoasset exchange and custodian wallet providers with the practical implementation of the provisions of the UK AML regulations. The new chapter therefore articulates the money laundering and terrorist financing risks to which the sector is exposed to, and also highlights specific considerations under the categories of customer, product, transaction, geographical and delivery channel risk.
Finally, the guidance provides practical risk mitigation information to support the design and enhancement of the systems and controls of cryptoasset exchange and custodian wallet providers, and in particular focusses on customer due diligence (CDD) measures, record keeping, dealing with suspicious transactions and sanctions screening.
This is a key development for the crypto sector given its newly AML regulated status, and will help to facilitate alignment of processes and controls to industry standard practice and aid with compliance to UK AML regulation.