15 January 2020

AMLD5 and the registration at DNB for crypto operators

Anti-money laundering directive (AMLD5): What is it and when does it enter into force?

The EU’s fifth Anti Money Laundering Directive (AMLD5) of 30 May 2018 is targeted at strengthening the rules surrounding the use of the European Union financial system for the purposes of money laundering and the funding of terrorism, following from concerns about new methods of terrorist financing.

The directive creates more substantial obligations for EU members’ Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) legislation. The legislation implementing the Directive was due to come into force in the Netherlands on 10 January 2020. However, on account of protracted discussions concerning the implementation of the legislation within Dutch parliament, the legislation, and the obligations under it, do not yet apply. The final date of implementation is not yet known. However, we do know the following.

Crypto operators: What are crypto operators? Who falls under the ambit of AMLD5?

Under the Dutch legislation implementing the AMLD5, crypto-operators, along with crypto wallet providers will fall under the regulatory supervision of the De Nederlandsche Bank (DNB). Crypto operators are firms that offer the exchange of virtual money (crypto) for real money. The Money Laundering and Terrorist Financing (Prevention) Act (Wwft), defines virtual currency as digital representation of value that is not issued or guaranteed by a central bank or a government, that is not necessarily linked to a legally determined currency and that does not have the legal status of currency or money, but which is accepted as a means of exchange. The most famous cryptos are Bitcoin, Ethereum and Ripple.

There are two types of crypto providers that must register with DNB. These are natural persons, legal persons or companies that:

  • offer services for switching between virtual currencies and fiat currencies; and / or
  • offer custodial wallets, in other words, entities that offer services to secure private cryptographic keys on behalf of their clients to hold, store and transfer virtual currencies.
  • The obligation only applies to parties who offer these services professionally or commercially in or from the Netherlands.

Registration at DNB: What to do and the Screening of Directors

Crypto operators will have to register with DNB. In addition, their board members and some shareholders (qualifying holdings) will need to be assessed. They must demonstrate that their processes are effectively designed to prevent money laundering and terrorist financing, and that board members and other policymakers sufficiently manage these processes.

Once the registration has been made, and the directors have been assessed, DNB will continue to ensure that the companies comply with the rules on money laundering, terrorist financing and sanction legislation.

Firms that do not register will not be permitted to provide crypto exchange services and wallets.