Definition of Money Laundering in the Context of Cryptocurrency
Money laundering in the realm of cryptocurrency refers to the process of concealing the illicit origins of funds obtained through illegal activities by making them appear to be derived from legitimate sources within the digital asset space. This involves intricate transactions or movements across various cryptocurrency platforms, aiming to obscure the trail and make it challenging to trace the digital funds back to their illegal source. The use of cryptocurrencies in money laundering poses significant concerns, often tied to activities such as organized crime and terrorism, and can potentially impact the integrity of the global financial system.
Cryptocurrency Regulatory Considerations in the Republic of Poland
In the Republic of Poland, the regulation of cryptocurrency activities is governed by the Polish Act of 1 March 2018 on Counteracting Money Laundering and Terrorist Financing. Key considerations for entities operating in the cryptocurrency space include:
- AML and KYC Procedures: robust implementation of Anti-Money Laundering (AML) and Know Your Customer (KYC) procedures tailored for virtual asset transactions. This involves stringent client due diligence, continuous transaction monitoring, and reporting of suspicious activities to authorities.
- Compliance with polish law: adherence to the regulatory framework established by the Polish government for Virtual Asset Service Providers (VASPs), ensuring compliance with specific requirements related to virtual assets and the prevention of money laundering.
- Data protection: Alignment with data protection laws in the Republic of Poland to ensure the secure and private handling of user information, especially critical in the context of cryptocurrency transactions where sensitive data is involved.
- Regular updates: ongoing review and updates of AML and KYC procedures to align with the latest legal stipulations and guidelines issued by Polish regulatory bodies, facilitating a proactive response to evolving compliance requirements.
- Collaboration with regulatory bodies: active engagement and cooperation with relevant regulatory bodies in the Republic of Poland, such as the Polish Financial Supervision Authority (PFSA), to stay informed about regulatory changes and to underscore a commitment to compliance.
- Risk-based approach: adoption of a risk-based approach for the assessment and mitigation of potential money laundering risks associated with cryptocurrency transactions, reflecting an awareness of the dynamic nature of the digital asset landscape.
Due to the fact that virtual currency is often exploited for money laundering (ML) and terrorist financing (TF), one of the biggest challenges for virtual currency service providers is to ensure and maintain specific measures in order to prevent illicit activity within the company. Therefore, Gem Crypto Sp. z.o.o. (Gem Crypto or the Company) establishes and implements its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Policy in accordance with the Act of 1 March 2018 on Counteracting Money Laundering and Terrorism Financing and other related regulations of the Republic of Poland. The Anti-Money Laundering and Know Your Customer Financing (the AML Policy) of Gem Crypto establishes rules that must be adhered to by the Company in order to properly manage risks of ML and/or TF as well as ensure reliable and secure services with high standards of integrity and transparency.
Key elements of the AML Policy
Client Due Diligence (CDD). CDD refers to the minimum due diligence measures which must be performed at the start of each business relationship. The establishment of the identity of the Client and Beneficial Owner is the process of collection and verification of the Client’s information. Know Your Client (KYC) is an obligatory due diligence process in the Company performed in order to identify its Clients and ascertain relevant information pertinent to doing financial business with them. The main purpose of the KYC process is to prevent identity theft, fraud, ML or TF. The initial step of the KYC process is to collect and document identification data about the Client and the Client’s beneficiary. Additionally, Gem Crypto verifies the obtained information against reliable and independent sources. CDD information allows assessing the extent to which the Client poses certain risks. Information, documents and data provided to Gem Crypto during the identity verification of the Client are processed in accordance with the Company’s Privacy Policy.
Risk Assessment. While assessing the risks, Gem Crypto applies the risk-based approach. A risk-based approach means that the Company has an understanding of the ML and TF risks to which it is exposed and applies prevention measures in a manner and to an extent that would guarantee the mitigation of such risks. This allows Gem Crypto to focus its resources and adopt enhanced measures in higher-risk scenarios.
Periodic review. The process refers to periodic review of Clients’ activity, updating the Clients’ profile and comparing new information to the previously obtained data.
Transaction monitoring. Gem Crypto is conducting continuous monitoring of the Clients’ transactions in order to ensure that the executed transactions correspond to the Company’s knowledge of the Clients (nature of transactions, nature of risk and knowledge about the source of funds, etc.). Ongoing monitoring is performed on all business relationships regardless of the Clients’ risk rating calculated under the risk-based approach.
Objectives of transaction monitoring are the following:
- To identify suspicious transactions;
- To ensure the relevance of the Client and beneficiary data, the purpose and nature of the business relationship;
- To ensure the relevance of the Client’s risk in the event of a change in circumstances;
- To determine whether the Client’s transactions correspond to the information previously collected on the Client; and
- To properly understand the Client’s activities and to create an exhaustive Client profile.
- Communication with Competent Authorities. Gem Crypto is obligated to notify the appropriate authorities and assist with any subsequent actions if there is any reason to believe that any property, regardless of value, is derived either directly or indirectly from criminal activity or participation in such activity, or that its intended use is to support one or more terrorists or terrorist organizations.
Suspicious Activity Reporting.
The Company identifies suspicious transactions by taking into account the Client’s activities that seem to be related to money laundering/terrorist financing during verification of the Client’s identity and performing continuous monitoring, including investigation of the transactions that have been processed during the business relationship.
The Company has established comprehensive transaction monitoring systems and a vigilant compliance team responsible for identifying suspicious activities or transactions. Suspicious activities can encompass a wide range of behaviours, including but not limited to unusual financial transactions, potential money laundering, fraudulent activities, or violations of regulatory requirements.
Record Keeping.
Gem Crypto maintains appropriate records in relation to every Client according to the regulations of the Republic of Poland. In order to enable efficient investigation, prosecution, and confiscation of criminal property, record keeping is crucial part of the AML program within the company.
AML Training.
Employee training at the Company is a fundamental element of our commitment to maintaining the highest standards of AML, compliance and financial integrity. The Company recognizes that the employees play a crucial role in upholding regulatory standards and combating financial crimes, including money laundering. Further, the Company is committed to maintaining the highest standards of integrity and compliance.