License requirement for virtual currency service providers
On 9 July 2018, the Fifth Anti-Money Laundering Directive (“AMLD5”) came into force which must be implemented in national legislation by the EU Member States by 10 January 2020. Member States are free to choose the form and means of implementation. AMLD5 amends the Fourth Anti-Money Laundering Directive and aims to combat the risks resulting from the anonymity of virtual currencies.
Pursuant to a legislative proposal which implements AMLD5 in the Netherlands and amends the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme (Wwft)) currently in force in the Netherlands, virtual currency service providers may need a license for the offering of their crypto services. Such license requirement goes beyond AMLD5, which only requires registration. The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten (AFM)) and the Dutch Central Bank (De Nederlandsche Bank (DNB)) recommend a licensing regime under the Wwft, because contrary to a registration regime, it enables applicants to be assessed, and if necessary rejected, before they enter the market. The aim of the legislative proposal is to prevent money laundering and terrorist financing through crypto exchange and custody.
In order for virtual currency service providers to qualify for a license, they must comply with the "Know-Your-Customer" principle, which means that the identity of the customer must be verified prior to the business relationship, so that the virtual currency service provider knows with whom it does business. Further, they must monitor all their customers' transactions, report suspicious transactions to the Dutch Financial Intelligence Unit and cooperate with any investigation of the Financial Intelligence Unit with respect to the customer.
Sandy van der Schaaf