Digital currency can mean a digital representation of either virtual currency or e-money and thus is often used interchangeably with the term “virtual currency”.
Decentralised, math-based virtual currencies have attracted increasing attention from an AML/CTF perspective because digital currencies are considered by some to be the future for payment systems.
Digital currencies may also provide a powerful tool for criminals, terrorist financiers and other sanctions evaders to move and store illicit funds, out of the reach of law enforcement and other authorities.
The Money Laundering and Terrorist Financing (ML/TF) risks associated with the digital currency sector include:
Digital currencies businesses captured by the AML/CTF obligations must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures. This is a critical first step in complying with the AML/CTF Act ands Rules.
Digital currencies businesses captured by the AML/CTF obligations are those providing services to exchange (buy and sell) digital currencies for FIAT currencies.
Fiat currency is legal tender whose value is backed by the government that issued it. The Austrian dollar is a fiat currency.
The provision of ‘wallet’ services that hold digital currencies for customers are also captured by the AML/CTF Act. However, digital currency to digital currency exchange is currently excluded.
The AML/CTF regime is risk based, which means that your responses to the AML/CTF obligations placed upon you should be risk-based.
A risk-based AML/CTF regime requires that you understand and address the Money Laundering and Terrorism Financing (ML/TF) risks associated with the digital currency services you offer.
You must then design, implement and maintain systems, procedures and controls that are proportionate to your ML/TF risks.
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