What is AMLD5 and why does it matter?
With the advent of the fifth European Anti Money Laundering Directive (AMLD5), virtual asset service providers have come under increased scrutiny by national competent authorities, especially in relation to prohibiting money laundering and anonymous transactions. AMLD5 and its transpositions to national legislation, as well as FATF recommendations on virtual currencies, are largely in agreement with another and require virtual asset service providers to monitor and block potentially unlawful origin and destination of funds that interact with their platforms.
...It is therefore essential to extend the scope of Directive (EU) 2015/849 so as to include providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. For the purposes of anti-money laundering and countering the financing of terrorism (AML/CFT), competent authorities should be able, through obliged entities, to monitor the use of virtual currencies. Such monitoring would provide a balanced and proportional approach, safeguarding technical advances, and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.
The anonymity of virtual currencies allows their potential misuse for criminal purposes. The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to anonymity, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed...
Blocktrade shall, therefore, in addition to fiat transactions, monitor cryptocurrency in- and outflows for unlawful origin and destination of funds. Potential red flags represent wallets associated with including, but not limited to: international sanctions, darknet, drug and weapon trafficking, terrorist organizations, etc.
FATF recommendations on virtual assets: http://www.fatf-gafi.org/publications/fatfrecommendations/documents/guidance-rba-virtual-assets.html
Liechtenstein Due Diligence Act: https://www.gesetze.li/konso/2009047000
Liechtenstein Due Diligence Ordinance: https://www.gesetze.li/konso/2009098000
FMA recommendations on the industry-specific operational implementation of due diligence provisions: https://www.fma-li.li/files/list/fma-wegleitung-2018-7-allgemeine-und-branchenspezifische-auslegung-des-sorgfaltspflichtrechts.pdf