AML regulation in Poland on cryptocurrencies

The new AML regulations and register for cryptocurrency companies in Poland

If you run a business involved in cryptocurrency business, you should familiarise yourself with the changes arising from the new provisions in the Act on combating money laundering and the financing of terrorism and certain other acts (the New AML Act). Because changes are waiting for you just around the corner.

NOTE: The new AML Act was published in the Journal of Laws on 30.04.2021. This means that it will enter into force – with regard to registration already on 31.10.2021. Currently operating crypto bureaux de change and exchanges have six months from this date to register in a special register!

If you are active in the cryptocurrency industry, you are undoubtedly familiar with the acronym: AML. If not, however, let me remind you at the beginning, for the sake of certainty, that AML stands for anti-money laundering.

The rationale for the changes to the AML Act as regards cryptocurrencies

On 30 March 2021, the Polish Parliament passed amendments to the Act on combating money laundering and the financing of terrorism and certain other acts (the AML Act).

The changes in the law are the implementation (introduction) of EU legislation and the recommendations of the Financial Action Task Force (FATF). This precisely concerns the implementation of the provisions of Directive 2018/843 of the European Parliament and of the Council amending Directive (EU) 2015/849 on the prevention of the use of the financial system for money laundering or terrorist financing – AML 5. Very broadly speaking, the new AML Act 2021 extends the scope of responsibilities of entities involved in cryptocurrency trading.

What is the aim of the changes to the AML Act?

The development of new technologies has brought to light numerous problems related to the lack of regulation adjustment to the growing cryptocurrency market. The FATF notes that more fraud and an increased number of undesirable financial practices are being identified with technological developments. Therefore, the FATF and the European Union believe it is essential to put in place solutions that can help minimise the impact of fraud in the financial sector (including the cryptocurrency sector). Only the implementation of international legislation, which applies uniformly in each of the states obliged to do so, can help in combating such illegal practices. The amended AML Act is intended to help in this regard.

Hiding the authenticity of the origin of income is considered a common problem. The legalisation of cash generated from various criminal activities sometimes happens in a decentralised form, unfortunately using cryptocurrencies.

If you deal with cryptocurrencies, you surely know that the cryptocurrency sector is not adequately regulated in the Polish legal system.

On 1 March 2018, the Act on combating money laundering and the financing of terrorism was introduced as a result of the implementation of the EU AML Directive 4. The solutions that have been included in the directive alone serve precisely to improve the process of verifying suspicious cryptocurrency transactions and exchanges into FIATs.

Who is affected by the new obligations under the AML Act in the cryptocurrency sector?

Not every entity focused on cryptocurrencies will be required to respond to the regulations under the AML. For example, websites educating on cryptocurrencies or consulting companies will not be subject to the new obligations.

The new obligations apply to obliged institutions (i.e. those that already have to comply with specific requirements).

IMPORTANT: Cryptocurrency entrepreneurs are subject to obligations under the AML Act if they provide the following services:

  • exchange services between virtual currencies and FIATs (bureaux de change, exchanges);
  • exchange services between virtual currencies (bureaux de change, exchanges);
  • brokering services between virtual currencies and FIATs or between virtual currencies (as above);
  • account maintenance services for virtual currencies (i.e. wallets).

The new AML Act in 2021, therefore, specifically affects entities such as:

  • crypto-bureaux de change;
  • cryptocurrency exchanges, and
  • entities that are responsible for providing cryptocurrency wallets.

Here are the fundamental changes for cryptocurrency business in Poalnd under the new AML Act in 2021:

1. Registration of cryptocurrency activities for AML purposes

The AML Act in 2021 proposes providing exchange trading services between virtual currency and fiat currency as a regulated activity.

Consequently, if you engage in this type of activity, you will be required to register in the register of virtual currencies kept by the minister responsible for public finance. The Act envisages that the entry into the register, together with a declaration of data compliance, will be made in the form of an electronic application.

If you fail to comply with this registration obligation, you may be fined up to PLN 100,000!!!

2. Virtual currency activities – registration requirements

A new Chapter 11a has been added to the AML Act, which regulates the rationing of the exercise of business activities by entities involved in virtual currency activities.

This chapter focuses on additional conditions for cryptocurrency activities. According to the new regulations, virtual currency activities may be carried out only by natural persons who have not been finally and legally sentenced for an intentional offence against the activity of state institutions and local government, against the administration of justice, against the credibility of documents, against property, against economic turnover or property interests and money turnover, as well as legal persons or organisational units whose shareholders have not been finally and legally sentenced under the terms specified above towards natural persons or a fiscal offence.

The amended AML Act for cryptocurrency activities also introduces competence and reputation conditions. Under the draft, persons choosing to run a business involving virtual currencies are required to have knowledge or experience related to the cryptocurrency domain.

This condition can only be met if:

  • that person completes a training or course that covers legal or practical issues related to virtual currency activities, or
  • that person has performed, for a period of at least one year, activities related to virtual currency activities.

The above requirements must be properly documented and are intended to serve as proof that the requirements are met. What is the purpose of such solutions? Above all, protection from criminal activity.

3. Amount limits for cryptocurrency activities – you must be verified from as little as 1,000 euros!

Besides the obligations mentioned above to register a business or the experience requirements, a regulation has also been introduced that refers to new limits on the amount of virtual currencies. Just to remind you – until now the limit was 15.000 euros

Entities that engage in cryptocurrency activities will be required to apply financial security measures accordingly to occasional transactions equal to or exceeding 1,000 euros.

In other words, you will not be able to buy/sell crypto without showing your ID if the value of transaction is 1,000 Euro or more.

As indicated in the explanatory memorandum of the draft Act: ‘The provision was introduced (…) to the requirements arising from the revised FATF Recommendations, (…) indicating situations in which « providers of virtual currencies » should be required to apply financial security measures. In its analyses, the FATF recognises the money laundering and terrorist financing risks associated with the use of innovative instruments such as virtual currencies and recommends a limit of 1,000 euros as appropriate for applying financial security measures to occasional transactions performed using virtual currency.’

The AML concerning cryptocurrency business in Poland: When do the changes apply from?

The new AML Act has already been published in the Journal of Laws! Its provision regarding the AML and cryptocurrencies in the new wording will come into force on 1 November 2021.

If you are running a bureau de change and want to implement the changes in time – contact us!

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Finally, I will just mention that these are not the only planned legal regulations on cryptocurrencies. We cannot forget, among others, the draft EU Crypto Market Regulation amending Directive 2019/1938 (the MiCa Regulation), which focuses on the regulation of virtual assets (digital assets) and ICOs.

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Can we finally expect further cryptocurrency legislation? We will find out in a little while. However, such actions show that the answer to this question can be affirmative.

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