As the financial sector embraces digital transformation, achieving regulatory compliance has become even more challenging and crucial. In 2024, important updates on Anti-Money Laundering (AML) regulations and the Markets in Crypto-Assets (MiCA) Regulation are set to redefine the regulatory framework. These changes are designed to enhance security and transparency, especially within the rapidly evolving fintech and cryptocurrency industries.
With this blog post, Maria Antoniou, an expert instructor at the institute, provides learners with in-depth knowledge to the specifics of Digital and Crypto Assets and how they compare to Fiat Currencies through the perspective of the Anti-Money Laundering (AML) framework. Furthermore, a comprehensive online self-study course is offered through the IforPE platform, titled “Understand AML Requirements in 2024: Fiat, Digital Assets & Crypto Assets”.
Towards the end of this blog post, you will find detailed information about the valuable skills and competencies acquired upon course completion and how they contribute to ensuring the complete understanding of Digital and Crypto Assets regarding AML regulatory developments.
What is a Digital Asset?
A Digital Asset is any asset that can be issued and/or transferred using Distributed Ledger Technology (DLT) or Blockchain Technology. Digital Assets can be of 5 different forms:
- Crypto Assets – digital store of value or medium of exchange, used for investments and payments.
- Stablecoins – cryptocurrencies designed for price stability, linked to fiat currencies, commodities or other crypto assets.
- Non-fungible tokens (NFTs) – tokens that represent ownership of a unique digital item and can be a work of art, a government ID, or a specific production unit.
- Central bank digital currencies (CBDCs) – represents a nation’s fiat currency which is backed by the central bank, and can be used for cross-border payments and transfers.
- Security token – digital assets that can be defined as a security or financial investment, tokenized versions of stocks and bonds or real-word assets (real estate, property, or equipment).
Crypto Assets under MiCA
As defined by MiCA a crypto asset is a digital representation of a value or a right, that can be transferred and stored electronically using DLT or similar technology. This broader definition by MiCA aims to capture all types of crypto assets currently falling outside the scope of EU legislation on financial services.
Additionally, as per MiCA a Crypto Asset Service Provider (CASP) is either a legal person or other undertaking whose occupation or business is the provision of one or more crypto asset services to clients on a professional basis and is allowed to provide crypto asset services.
The crypto asset services prescribed by MiCA include:
- Placing of crypto assets;
- Reception and transmission of orders for crypto assets on behalf of clients;
- Providing advice on crypto assets;
- Providing portfolio management on crypto assets;
- Proving transfer services for crypto assets on behalf of clients.
Fiat Currency vs. Crypto Assets Fiat currency is issued by a government while a crypto asset is produced by computers. Fiat currency is represented by bills & coins while crypto assets are represented by private and public pieces of code. Lastly and very importantly, fiat currency is centralised meaning it’s issued and controlled by the law and banks, on the contrary, a crypto asset is decentralised and not controlled by the government.
Anti-Money Laundering Framework in Crypto-Assets
In 2024, major updates to the AML regulations and the MiCA are set to significantly transform the regulatory environment. The Regulation (EU) 2023/1114 of the European Parliament and the Council on Markets in Crypto Assets establishes a comprehensive and unified framework that provides specific rules for crypto assets and related services. Its aim is to outline uniform requirements regarding crypto assets and the authorisation, operation, organisation and governance of Crypto Asset Service Providers (CASP).
The Regulation’s primary goals are to:
- Provide a legal foundation for crypto assets not currently covered by existing EU legislation,
- Replace existing national frameworks that regulate crypto assets not covered by existing EU financial services legislation,
- Establish specific rules for stablecoins, including their classification as e-money.
The harmonized legal framework for crypto assets introduced by MiCA is set to have a profound impact on the EU crypto market. By promoting transparency and enhancing trust, MiCA will not only strengthen the industry's reputation but also foster further growth and innovation in the sector.
What is the “Understand AML Requirements in 2024: Fiat, Digital Assets & Crypto Assets” course and what does it include?
This course is suited for professionals working at Cyprus Investment Firms (CIF), Crypto-Asset Services Providers (CASP), and other entities regulated by the Cyprus Securities and Exchange Commission (CySEC). Including, auditors and lawyers who deal with AML matters.
- Fiat Currency, Digital Assets and Crypto Assets
- What is a Fiat Currency?
- What is a Digital Asset?
- What is a Crypto Asset?
- Crypto-assets as Financial Instruments
- Fiat vs.Crypto
- What is a Crypto Asset Service Provider?
- Questions & Answers
- Money Laundering & Terrorist Financing
- What is Money Laundering?
- Stages of Money Laundering
- Methods of Money Laundering
- What is Terrorist Financing?
- Differences between ML & TF
- Similarities between ML & TF
- ML & TF risks emanating from crypto-assets
- The AML Regulatory Framework
- Supervisory Authorities
- Powers of the supervisory authority
- AML Regulatory Framework
- EU Directives
- National Law
- Revision of Regulation 2015/847/EU
- Cyprus National Risk Assessments of 2018 & 2021
- Cyprus National Risk Assessments of 2018
- MOKAS and its powers
- NRA and ML threats
- The Vulnerable Sectors as per the NRA
- Banking Sector
- Securities Sector
- Cyprus National Risk Assessments of 2021
- Supervisory Authorities
- Expected Legal Updates
- The Travel Rule
- Key Findings – Supervisory Authorities, Banking, Securities and ASP sector
- What to expect following the NRA findings
- Important Recommendations
- Assessing & Managing Risks – Risk Based Approach & Risk Scoring
- Risk Based Approach
- Primary risk factors and associated risks
- Customer Economic Profile
- Assessing and managing ML/TF risks
- Information to be collected
- Weighting risk factors
- Practical Examples
- Customer Due Diligence & KYC, KYT, KYW
- Customer Identification and Due Diligence procedures
- Simplified Customer Due Diligence (SDD)
- Enhanced Customer Due Diligence (EDD)
- Documentation
- Transaction Monitoring
- Wallet Identification
- Practical Examples
- Suspicious Transaction Reports
-
Suspicious Transactions
- Red Flag Indicators
- Suspicious Transaction Reporting
The “Understand AML Requirements in 2024: Fiat, Digital Assets & Crypto Assets” course offers materials in both PDF slides and online video recordings, allowing for flexible, self-paced learning. Enrolled learners can study anytime and anywhere at their convenience.
After completing the course, participants can assess their understanding of the material through a set of knowledge-based questions.
Professionals who complete this course will gain the knowledge and competencies to enhance AML policies and procedures, ensure compliance with upcoming AML regulatory obligations and establish the required controls for customer and transaction monitoring utilising a risk-based approach.
The completion of this course counts towards the Continuous Professional Development (CPD) annual requirements of the CySEC Advanced, Basic and AML certifications.
