New AML obligations for the crypto industry

On 29 May 2020, the National Assembly received an urgent proposal from the Government of the Republic of Slovenia to amend the Prevention of Money Laundering and Terrorist Financing Act (the ZPPDFT-1B). The harmonization with the Union acquis follows an official reminder from the European Commission because Slovenia has not notified the regulations for transposition of Directive (EU) 2018/843, which should have been harmonized with the directive by 10 January 2020. This contribution outlines some novelties in the crypto industry field.

The amendment transposes into the Slovenian legal order individual definitions of the Directive (EU) 2018/843. Virtual currency is a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically. It defines a custodian wallet provider as a natural or legal person that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.

The amendment also (in a non-systemic manner) regulates the crypto industry. Legal and natural persons performing transactions related to the activity of exchanges between virtual and fiat currencies or other transactions included in these services or offering custodian wallets will be liable for measures to detect and prevent money laundering and terrorist financing. In order to ensure control in this area, a register of providers of exchanges services between virtual and fiat currencies and providers of custodian wallets will be established. Providers with their registered office or branch in the Republic of Slovenia will have to register in the relevant register before the start of the provision of services. They will also have to notify the Office of the Republic of Slovenia for the Prevention of Money Laundering within 8 days of any changes and notify the providers involved in their virtual and fiat currency exchange services.

The amendment ZPPDFT-1B is not yet effective. Nevertheless, it is in the interest of providers of exchanges between virtual and fiat currencies and custodian wallets to prepare for it in due time. EU Member States are required by the directive to ensure registration. Thus, the registration obligations will almost certainly be transposed into national law. For violations, the law provides for high fines in the range between EUR 6,000 and 120,000 for a legal entity, wherein fines are also envisaged for sole proprietors and responsible individuals.

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