I remember a year ago when bitcoin meetups were 20 people in a room; now 300-400 people is not uncommon. Often, the people I spoke to thought that bitcoin existed in a parallel universe where no laws apply – people started to wake up when Charlie Shrem was arrested. So let me dispel a myth that still circulates even today: “if the bitcoin business is unregulated then I don’t have to worry about Anti-Money Laundering compliance”. Do so at your peril my friend.
In the UK there is a difference between the Proceeds of Crime Act and the Money Laundering Regulations (MLR).
MLR applies strictly to regulated businesses (such as financial services firm, MSBs regulated by HMRC) and sets out the due diligence requirements for customer on-boarding, on-going monitoring, record-keeping, policies and procedures and training.
Separately, you have the Proceeds of Crime Act and the various counter terrorism laws. A lot of these provisions apply to unregulated businesses.
The primary offences of assisting, concealing the proceeds of crime applies to everyone. Same with the primary terrorism offences. Prejudicing an investigation into money laundering applies to unregulated businesses. If the unregulated business has a ‘nominated officer’ then failure to disclose suspicion of money laundering applies. And s.19 of the Terrorism Act 2000 requires any person (regulated or unregulated) to tell the authorities if they suspect that another person is involved in fundraising for terrorism.
Remember also that it is an offence to make funds or financial services available to anyone on the Financial Sanctions list – this is regardless of whether you are regulated or not (see further guidance here).
So the upshot is, if you are an unregulated digital currency business – act as if you were regulated. Better to be overcautious than sorry later. The positive point is that if you are unregulated you can apply more flexibility to your on-boarding processes.