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From 3 April 2018, anyone who operates a digital currency exchange must comply with anti-money laundering and counter-terrorism financing (AML-CTF) regulations. This includes anyone who allows traders to buy and sell Bitcoin, Ethereum and other digital and cryptocurrencies that are interchangeable with money or can be used to buy goods or services.

What will change from 3 April 2018?

Digital currency exchanges will need to:

  • Enrol with AUSTRAC and register as an exchange;
  • Have an AML-CTF Program;
  • Complete Know Your Customer (KYC) checks and verification;
  • Report suspicious matters and inform AUSTRAC about transactions of $10,000 or more; and
  • Keep records, like AML-CTF policies and documents.

Any digital currency exchange that doesn’t do this may face civil and criminal penalties that include fines and up to 7 years imprisonment.

AUSTRAC will also have the power to issue an infringement notice, which is like an instant fine, if you do not:

  • Comply with KYC requirements;
  • Report suspicious matters and threshold transactions;
  • Lodge compliance reports; and
  • Keep records.

There is a small glitch in the process

Registration for AUSTRAC can take up to 90 days and you won’t be able to apply to register until the new changes come into effect.

AUSTRAC is aware of this issue but hasn’t finalised its policy yet. It’s most likely that they will allow unregistered digital currency exchanges to continue to operate from 3 April 2018, provided they’ve taken ‘reasonable steps’ to comply with their AML-CTF obligations within certain timeframes.

Even if you’re not registered, some things AUSTRAC may require you to do include:

  • Apply for enrolment and registration with AUSTRAC within a certain timeframe such as 6 weeks;
  • Report some things to AUSTRAC, like suspicious matters or transactions worth $10,000, from the day you apply for enrolment and registration. Access to AUSTRAC’s portal is only available to those who are registered, so reports may need to be submitted in another way, like by phone; and
  • Comply with other AML-CTF obligations within a longer period such as six months.

What you can do now

Even though AUSTRAC hasn’t released their policy yet, there are several things you can do to prepare for these changes. These include:

  • Set up your AML-CTF compliance before the changes take effect. For example, prepare your AML-CTF Program and start implementing it; and
  • Get your key personnel (including owners, directors, or any person who makes decisions affecting the business) to complete their police checks now. These remain valid for up to six months and will need to be completed before you submit your application.

If you are unsure whether these changes apply to you, would like to know more about your obligations, or need help registering with AUSTRAC, we’d be happy to help.

Author: Chris Deeble and Lachlan Robb

February 2018

Lachlan Robb is a law student at Griffith University who is currently conducting research in cryptocurrency and blockchain regulation.

Note - Since publishing this article, AUSTRAC has announced that it will host half-day workshops on the new requirements for digital currency exchange providers. You can get more information and register your interest for a workshop here

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