Australian digital currency exchange providers have new obligations effective today

Australia’s financial intelligence agency AUSTRAC has earlier today posted a reminder to digital currency exchange providers about their new AML/CTF obligations. These new requirements get into effect today, April 3, 2018.

Such businesses are required to comply with a range of AML/CTF obligations, including:

• adopting and maintaining an AML/CTF program to identify, mitigate and manage money laundering and terrorism financing risks;
• identifying and verifying the identities of their customers;
• reporting to AUSTRAC suspicious matters, and transactions involving physical currency of $10,000 or more;
• keeping certain records for seven years.

AUSTRAC explains that a ‘policy principles’ period of six months will be in place from today. During that period, the AUSTRAC CEO can only take enforcement action if a digital currency exchange business fails to take ‘reasonable steps’ to comply.

Transitional registration arrangements will be in place for existing businesses to allow them to continue providing services while their registration application is being considered. Existing businesses providing DCE services will need to register with AUSTRAC by May 14, 2018.

The new requirements stem from the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017, which is also known as the “Bitcoin bill”. In December last year, the legislative piece passed both Houses and got Royal Assent.

AUSTRAC’s CEO may suspend the registration of an entity in certain cases. In such cases, the AUSTRAC CEO may have regard to whether the person or any of its key personnel have been:

• (a) charged, prosecuted, or convicted in relation to money laundering, terrorism financing, terrorism, people smuggling, fraud, a serious offence, or an offence under the AML/CTF Act or FTR Act;
• (b) the subject of a civil penalty order made under the AML/CTF Act; or
• (c) the subject of any adversely determined civil or criminal proceedings or enforcement action in relation to the management of an entity, or their commercial or professional activities.

Other factors to consider when suspending one’s registration are whether there are reasonable grounds to believe that:

• (a) any information or document provided under this Chapter was false or misleading (whether by inclusion or omission) in a material particular;
• (b) the continued registration of the person involves, or may involve, significant money laundering, financing of terrorism, or other serious crime risk.

Let’s recall that the Amendment Act expands legislation to include regulation of digital currency exchange providers. Under the new regulation, such providers will be required:

• enroll and register with AUSTRAC;
• establish, implement and maintain an AML/CTF program, which sets the framework for businesses to comply with their obligations, including customer due diligence requirements;
• report threshold transactions and suspicious matters to AUSTRAC, and
• keep appropriate records.