NPPS NEW PRODUCTS AND PAYMENT SERVICES

Virtual currencies : Bitcoins and others

THE SIGN OF THE TIMES

Virtual currencies have recently developed into a widely accepted method
of online payment
They are flexible, efficient and have low transaction costs
However, virtual currencies also present potential AML/CTF risks, such as
The limited identification and verification of participants
The ability to easily conduct online cross-border transactions
The anonymity provided by the trade or transfer
The funding of virtual currency units through illegal cash

HOW DO REGULATORS VIEW THE ISSUE?

Currently, virtual currencies are not regulated and are therefore prone to
be used for illegal activities. Some governments have prohibited their use,
others view them less rigidly.
Regulators around the world are facing a number of challenges with regards to virtual
currencies and are still seeking to develop and implement AML/CTF regulation for these new
payment products and services.
Virtual currency addresses have no names or other customer identification information
The anonymity provided by transfers makes the users difficult to trace
Protocols do not provide for historical records of transactions
As a decentralised system, there is no central server, service provider or oversight body

YOU ARE A DIGITAL CURRENCY OR NPPS PROVIDER!

WHAT CAN YOU DO?
Although the legal framework is not set, you can already now
conduct sufficient efforts to ensure you and your company are
not used for illegal purposes, by
Identifying the risks of your business on a risk based approach (RBA) prior to
its launch: i.e. risks pertaining to the new technology, the new product, the
business practices, your counterparties
Allocating an AML risk classification on a RBA to each of your customers
(ongoing activity): risk criteria to include Customer Due Diligence, record
keeping, account and transaction limits, geographical and cross-border,
potential outsourced services and interaction of service providers

YOU ARE A DIGITAL CURRENCY OR NPPS PROVIDER!

WHAT CAN YOU DO?

Maintaining a continuous follow-up of your customers and their transactions relative to the risk
they present
Ensuring regular training to company staff
Ensuring appropriate interaction with the respective authorities

Additional information may be obtained from following sources:

http://www.fatf-gafi.org/topics/methodsandtrends/documents/virtual-currency-definitions-aml-cft-risk.html
http://www.fatf-gafi.org/topics/fatfrecommendations/documents/rba-npps-2013.html
http://www.cssf.lu/fileadmin/files/Publications/Communiques/Communiques_2014/Communique__monnaie_virtuelle_140214.pdf
http://www.cssf.lu/fileadmin/files/Protection_consommateurs/Avertissements/A_EBA_Monnaies_virtuelles_181213.pdf

CHARLIE SHREM: BITCOIN ENTREPRENEUR IN THE NEWS

Charlie Shrem, CEO of the Bitcoin payment processor BitInstant was arrested in
January 2014 and charged with money laundering and operating an unlicensed
money transmitting business.
Shrem is being accused of knowingly selling more than $1 million worth of Bitcoins to a Florida
man who in turn sold them to anonymous users of Silk Road, a black market cyber broker, to
enable its users to buy and sell illegal drugs, weapons, stolen identity information and other
unlawful goods and services.
Shrem is also accused of failing to report these illegal transactions.
The US Justice Department seized the website and approx. 174,000 bitcoins worth $33.6mio.

Recently, Charlie Shrem pleaded guilty to one count of aiding and abetting an unlicensed money
transmitting business (Silk Road) and admitted he knew he was doing wrong.
The investigation is ongoing Keep watching this space!

CDDS PROTECTS YOUR BUSINESS AGAINST POTENTIAL

THREATS AND HELPS YOU RESPECT YOUR FORTHCOMING
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AMLspotter Bitcoin, an all-in-one
solution that provides you:
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Dynamic KYC / KYT
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AML risk dashboard
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