CRYPTO firms operating in Ireland are vulnerable to use by money launderers and terror financiers, the central bank has warned.
Following a review of registration applications from Virtual Asset Service Providers (VASPs), the central bank said it found “significant and widespread weaknesses in the vast majority of applicants’ proposed risk and control frameworks” relating to money laundering.
Among the issues highlighted in an anti-money laundering bulletin distributed to the industry yesterday was evidence that many crypto companies had failed to assess or document the risk that their services could be used by criminals to hide illicit profits .
Some applications received by the Central Bank did not even meet basic Irish regulatory requirements, instead referencing legal frameworks from other jurisdictions, suggesting firms had used a cut-and-paste approach to registration.
The result, according to a Central Bank statement, was that a significant number of firms attempting to establish a presence in Ireland could not demonstrate that they were meeting their obligations under the Anti-Money Laundering and Terrorist Financing (AML/KFT) Regulations.
“All entities regulated and supervised by the central bank for AML/CFT purposes must be able to demonstrate a robust AML/CFT control framework that is compliant with relevant obligations,” said Enforcement Director Seána Cunningham.
“The central bank will only register a firm if it is satisfied that the firm can continue to meet its AML/CFT obligations.”
She added that crypto firms operating in Ireland without registering with the central bank could face criminal and administrative penalties, including fines of millions of euros.
But the central bank isn’t exactly cracking down on the industry.
Instead, regulators are trying to help VASPs improve their AML/CFT protocols after it became apparent that there is a compliance deficit in the industry.
The move comes just over a year after a rule change that forced VASPs to start registering with the central bank for AML purposes. Crypto firms are still not covered by consumer protection legislation.
However, despite the soft approach in yesterday’s bulletin, the central bank’s position on cryptocurrencies ranges from skeptical to hostile.
Governor Gabriel Makhlouf has repeatedly warned that crypto assets are “highly risky and speculative,” likening the recent fad for Bitcoin to 17th-century Dutch tulip mania.
In February, the bank said “bad actors” were manipulating cryptocurrency markets, and in March regulators warned the industry to be on the lookout for Russians attempting to evade financial sanctions by using the digital assets to move money .
The IRS has also increased its surveillance of crypto transactions and now requires holders of bitcoin and other cryptocurrencies to report their payment activity for tax purposes.
Global authorities like the Financial Actions Task Force have also increased the pressure on the crypto world with new rules.
https://www.independent.ie/business/irish/regulators-warn-crypto-firms-are-not-up-to-speed-on-fraud-rules-41831604.html Regulators warn that crypto firms are not up to speed with scam rules