Crypto Industry and Evolving AML Compliance Obligations

Blog / Crypto Industry and Evolving AML Compliance Obligations

Cryptocurrency markets have been on the rise in recent years. This demand in the crypto market and the expansion of the industry brought with it the necessity of regulation because regulatory gaps are a serious potential for criminals, and they exploit them.  Realizing these criminal transfers between countries, especially on crypto assets, have become more accessible. Since the sector is still new, definite determinations and decisions cannot be made. Many governments are trying to control the sector by trying different methods against crypto assets. Many methods impose restrictions on the industry, while others prohibit it completely. The government is worried about not being able to contain the progress of the crypto asset. In this process, both global regulators and regulators of countries continue to announce new regulations on this issue.

Digitization and Crypto Sector

There is digitalization in the background of the Crypto sector in the international arena, gaining an important market. Now that the Internet offers seamless connectivity, the functioning and trade of virtual sectors such as crypto has been lifted. In particular, the digitalization phenomenon, which has its effect in every field, has affected many areas such as the evolution of technology and digitalization in operational processes, artificial intelligence-based systems, cloud technologies, robotic systems, in the field of the Crypto sector, which is not dependent on any authority, without being dependent on any central bank, without being subject to any printing and distribution, such as blockchain. Expanded. Crypto has gained a large area in the world established on the Internet. Of course, these developments have brought the need for robust security measures and reliable management systems with continuity. In particular, the fact that this sector is not dependent on any authority has created an attractive area for financial criminals. This has increased the importance of compliance solutions such as the artificial intelligence-supported Sanction Scanner, produced to prevent financial crimes.

World and Crypto Industry

Cryptocurrency, which started to exist in our lives in 2009, has spread the global in a short time, which is not dependent on any authority and is anonymous. Internationally, the biggest question of tax offices, enforcement agencies, and regulators regarding this sector is whether cryptocurrencies are legal.

The exact number of thousands of cryptocurrencies is not produced or regulated by any central bank. Cryptocurrencies are generally used as a peer-to-peer payment system because they are not produced in a physical form. For this reason, it allows cross-border transactions without exchange rate fees and allows its users to remain anonymous. There are crypto exchanges where crypto assets spin their trades. These exchanges include cryptocurrencies that are traded globally. The estimated market value of these cryptocurrencies in the past 2020 has approached $202 Billion. In the face of all this, the absence of international regulatory laws increases financial crime risks in these processes. The need for regulation regarding crypto-assets has arisen in countries. To review countries and crypto regulations:


USA: FinCEN, that is, Financial Crimes Enforcement Network, which is affiliated with the US Treasury, obliges companies designated as Money Transmitting Businesses MTB in the crypto field to comply with bank secrecy laws and regulations while obliging them to apply AML anti-money laundering conditions and KYC know your customer processes. The fine that Fincen imposed on Ripple in 2015 is the first sanction imposed on crypto assets by the state. FinCEN also guides Bitcoin. There is no full decision about Bitcoin in America; while it is prohibited in some states, some states have no restrictions. It has also published 40 recommendations to be covered in the FATF's Travel Rule, which will recognize a regulatory imperative for the crypto industry in the US. The travel rule is an AML/CFT obligation that financial institutions in 37 countries around the world have to implement. As part of Part 16 of the FATF recommendations, virtual asset transfers must provide detailed information such as the name, account number, physical address, national identification number, client identification number, date, and location of the creators and beneficiaries. It should provide information such as account numbers. This is necessary to provide AML/KYC processes and create risk profiles. The US is generally considered bitcoin-friendly. Bitcoin is used as a payment tool in many leading businesses. CANADA: Canada approved


CANADA: Canada approved a world-first directly-backed bitcoin exchange-traded fund in 2021, increasing investor access to cryptocurrencies. Despite this, there is still no legalization of crypto. Canada supports the use of cryptocurrency while at the same time trying to ensure that it is not used for money laundering and terrorist financing. Bitcoin Kana is also considered a commodity by the revenue administration. In short, Canada views bitcoin exchanges as money service businesses. This approach places the Crypto industry under the surveillance of anti-money laundering and terrorist financing laws. Therefore, registration of Crypto exchanges with FINTRAC requires reporting suspicious transaction reports, performing compliance checks, and documenting.


United Kingdom: Although the UK has not yet enacted crypto exchanges, it will consider crypto transactions as forex transactions and tax them as capital income. Value-added tax will also be applied as it is also used as a means of payment. The FCA ensures that the regulatory environment supports the digital currency.


EU: Although the EU followed the crypto developments, there was no central approach in itself, and each country was developing the crypto exchange approach. The EU made the crypto sector responsible for the aml control process within the scope of the directives it developed to prevent money laundering and terrorist financing. At the same time, it has tried to control crypto money transfers by publishing an action plan covering only the crypto sector. With the revision in the EU Fund transfer regulation, more stringent measures for bitcoin and altcoin transfers will be put into effect if unanimously accepted.


Turkey: Crypto assets have attracted a lot of attention from investors in Turkey. The increase in cryptocurrencies, which started to become even more popular in 2017, did not go unnoticed by investors. This has significantly increased the awareness of cryptocurrencies. While Turkey is taking steps to issue its own crypto money, it has also mentioned the crypto-assets regulations under financial issues in the 11th Development Plan. These regulations include implementing Blockchain-based digital central bank money and the establishment of a union of payment services and electronic money institutions. The first regulations regarding Turkey's payment methods are the Law that entered into force in 2013, which covers the general provisions on payment and electronic money in parallel with the EU directives. Legal regulations related to crypto-assets are discussed in terms of income tax legislation, value-added tax law, corporate tax law, electronic fund transfer legislation, and anti-money laundering legislation. To ensure that the crypto sits on a legal basis, it has been decided to authorize the Capital Markets Board to regulate and supervise. There are no restrictions or prohibitions on crypto matters in Turkey.




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