How AUSTRAC is cracking down on cryptocurrency exchanges

Angus Kidman 25 January 2018 NEWS

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New anti-money-laundering rules will mean tougher ID requirements and reporting of suspicious transactions.

Come April 3, cryptocurrency exchanges operating in Australia will need to be able to prove they can conform with updated anti-money laundering laws, and will have to sign up with a newly-created Digital Currency Exchange Register.

Anti-money-laundering laws exist to ensure that criminals can't easily dispose of the profits of criminal activities without being detected. Digital currencies weren't covered under existing legislation. As I've noted before, the official ATO perspective is that cryptocurrencies don't count as currency, but laws in this area are having to adapt rapidly.

The changes were officially signed off on 13 December last year and regulator AUSTRAC will implement them. AUSTRAC is currently running an industry consultation seeking feedback on the newly introduced draft rules ahead of the April 3 deadline.

"DCE providers will need to register with AUSTRAC," the regulator's site advice notes. "This closes a 'regulatory gap' where these businesses were not regulated. A benefit to DCE providers is that being registered can help boost consumer confidence in the sector."

The key tasks that local exchanges will need to perform as part of getting on the register include:

  • Ensuring all key staff members have been registered, a process which includes a police check for each employee.
  • Implementing a business-wide anti-money laundering program.
  • Reporting any transactions which rise above a specified threshold (currently $10,000 in cash) or which otherwise appear suspicious.

Even large financial institutions have struggled at times with ensuring their anti-money-laundering processes are effective. Commonwealth Bank is being investigated by AUSTRAC over breaches of money-laundering laws and confirmed in December last year that more than 53,000 breaches of statutory disclosure laws had occurred.

We've seen evidence recently that some local platforms are struggling to maintain their technology, and having to add anti-money-laundering into the mix won't help much.

What do the changes mean for individual Australian cryptocurrency traders? New registrants on an exchange may face tougher ID requirements. Outside of that, the likely short-term answer is "not much", unless you're routinely making deposits of more than $10,000 to fund purchases of other cryptocurrencies, or your preferred local exchange doesn't get around to signing up and ends up shut down as a result.

However, the changes do suggest that we won't see dozens of new local exchanges being created to take advantage of the current cryptocurrency frenzy because the regulatory barriers to doing so are now somewhat higher. And that's not necessarily a bad thing.

Cryptocurrency is a volatile space, with recent research suggesting initial coin offerings are problematic and plagued by fraud. Tighter regulation will help with some of these issues, but a cautious approach remains sensible.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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