New AML/CTF regulation of virtual currency services

Reflecting the 4th AML (Anti-Money Laundering) Directive[1], on January 1, 2017 an amendment of Czech AML/CTF Act[2] came into force. For the first time “virtual currencies” are explicitly mentioned within the Czech legislation. Although the definition of virtual currency provided in the AML/CTF Act may be questionable[3], it is clear that the legislator intended to subsume under the definition most of the so called cryptocurrencies.

According to this new law, persons providing services in connection with virtual currency are now obliged entities within the meaning of the AML/CTF Act. Persons providing services in connection with virtual currency are defined by the AML/CTF Act as those with business activity of buying, selling, storing, managing for others or facilitating purchase or sale of virtual currency or providing other services connected with virtual currency. The broad definition of persons providing services in connection with virtual currency makes it clear, that the new law affects not only virtual currency exchanges (irrespective of whether they exchange also fiat currencies or not), wallet service providers, but also any other business, providing services in connection with cryptocurrencies beyond their mere acceptance as a form of payment for goods or services.

Being and obliged entity makes it mandatory to have various AML/CTF procedures in place, including “know-your-client” identification procedures (KYC), record keeping and reporting of suspicious activities.

[1] Directive (EU) 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.

[2] Act No. 253/2008 Coll., Selected Measures against Legitimization of Proceeds of Crime and Financing of Terrorism.

[3] The AML/CTF Act defines virtual currency as “electronically stored unit, regardless if there is or isn’t an issuer, and which is not considered as money according to Payment System Act, but is accepted as payment for goods or services by another person different from the issuer”.

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