Anti-money Laundering and Counter-terrorism Financing Policy: Know Your Customer (KYC).
The European Union’s Fifth Anti-Money Laundering Directive (5AMLD) extended Anti-Money Laundering and Countering the Financing of Terrorism (AML / CFT) obligations to entities that provide certain services relating to virtual assets.
Ireland has transposed 5AMLD into Irish law by way of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 ("2021 Act") and the provisions of the 2021 Act that relate to VASPs commenced on 23 April 2021. The 2021 Act extends the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021 ("CJA 2010 to 2021") to VASPs. This firm has identified itself as a VASP and thus is working to meet its related obligations.
As a VASP, the firm is now a "designated persons" for the purposes of the CJA 2010 to 2021 and we are required to comply with the AML/CFT obligations contained under Part 4 of the CJA 2010 to 2021 which include:
- Carrying out an ML/TF risk assessment of their business;
- Undertaking customer due diligence (CDD) of their customers;
- Carrying out ongoing monitoring of customers and customer transactions;
- Filing Suspicious Transaction Reports (STRs) with Financial Intelligence Unit (FIU) Ireland and the Revenue Commissioner in instances where money laundering or terrorist financing is known or suspected;
- Maintaining and implementing AML/CFT policies, procedures and controls;
- Retaining appropriate records; and
- Providing AML/CFT training to all staff on an ongoing basis.
In line with the aforementioned legislation we have prepared this policy in order to ensure that Bitcove has adequate procedures and controls in place in order to deter, detect and disclose potential financial crime, money laundering and terrorism financing activity.
This document serves as the publicly available version of the overall Anti-money Laundering and Counter-terrorism Financing Policy for this firm. The full policy contains some operational aspects of our AML/CFT & KYC processes; this file contains the published subset of the policy.
The firm is aware of the need to have a thorough understanding of the financial crime and money laundering risks faced by the firm and to ensure that they have appropriate systems and controls in place to identify, assess, monitor and manage these risks. Thus, the firm has performed an AML / CTF risk assessment. This will be repeated on an at least an annual basis or on the introduction of a new product, service or relevant legislation. All customers, products and services have been placed within one of several risk categories.
Policies, Procedures and Controls
Based on the output of the risk assessment and other such activities, the firm has a set of procedures and controls related to AML / CTF. These include the Customer Due Diligence, Monitoring, Training and other such activities as detailed in the overall AML / CTF policy. While AML / CTF is responsibility for all staff of the firm, a Money Laundering Reporting Officer (MLRO) has also been put in place to ensure these procedures and controls and the overall policy and kept up to date and enacted. This topic and others related to the risk and compliance of the firm are then discussed with the management at the regular AML/CTF, Risk Management & Compliance Committee (ARCC) of the firm.
Customer Due Diligence (CDD) & KYC
All customers are subject to Due Diligence before they can trade via the firm. There are 3 types of customers at this time:
- BitCove Online Platform:
The verification is provided via the authenteq.com platform. Only the following documents can be used for this process:
- Driving Licence
- National ID
This process uses a set of techniques to ensure a valid identification including a liveness check. Using machine learning liveness algorithms the process determines if the customer is a genuine human presence taking the selfie in real-time and if their ID document is authentic; False non-match rates have been shown to be lower than 0.01% and false matches at 0.0001%.
The customers is also asked for their sources of funds as part of the KYC process.
- ATM Platform:
The process for customers on the ATM platform is mindful of the more occasional nature of such users. As with the platform, the following documents are accepted:
- Driving Licence
- National ID
Transactions via the ATM Platform to require Proof of Identity:
- The user is asked to show their ID and the ATM takes a selfie photo – these are recorded by the ATM and is sent to the central records of the firm; and,
- The ID and selfie are checked against the picture by BitCove staff.
Once this process is completed, the user can transact.
- Corporate Clients:
The firm will ask for the list of required documents in email; These are then checked manually. The firm may also ask the executor on the account to undergo an individual sign up. Corporate documents such as proof of incorporate, constitution, articles of association (as applicable):
- Account Opening Form including source of funds;
- Proof of Business Address
- An outline of the business activity & the nature of the transaction
- An outline of Beneficial Owners
- Beneficial Owners – will then require identification via ID.
Note that for any CDD process, customers cannot upload pictures from their devices.
In line with the related legislation, we are required to ensure that scrutiny is being applied to transactions at all times. Our firm has procedures in place to ensure that all relevant personnel are adequately trained in relation to the identification of customers, ongoing monitoring and the recognition and reporting of suspicions of money laundering. In addition, the MLRO performs more detailed transaction analysis to identify suspicious transactions. This includes reviewing multiple transactions via cumulative transaction monitoring and other such analysis.
The firm will have checked to ensure that new customers do not appear on relevant PEP and financial sanctions lists. Customer are checked against these lists and the lists themselves are checked regularly to ensure the customer continues to comply with its PEP and financial sanctions obligations. All suspicious transactions are considered by the MLRO and if deemed to be sufficiently questionable, they are passed to the STR process (see below).
Suspicious Transaction Reports (STRs)
There is a clear procedure in place for Suspicious Transaction Reporting. It is the firm’s policy that all personnel must submit a report to the Money Laundering Reporting Officer (MLRO) when they know or suspect or have reasonable grounds for knowing or suspecting that a customer has been engaged in Money Laundering / Terrorist Financing. All Money Laundering Internal Suspicious Transaction Reports are maintained on a system to which only the MLRO has access.
The MLRO will investigate each report and decide whether or not it warrants sending a Suspicious Transaction Report (STR) to An Garda Siochana and the Revenue Commissioners. Where such action is required the STR shall be made as soon as possible, and details of this decision documented and maintained on file with the original report.
It is the firm’s policy to keep records in compliance with Section 55 of the CJA 2010 as follows:
- Evidence of identity checks to be maintained for 5 years after an individual ceases to be a member of the firm;
- Details of transactions are maintained for a period of 5 years after the transaction occurs;
- Details of any internal reports of suspicious activity to be maintained on file by the MLRO for a period of 5 years from date of the report; and
- Details of any external reports made by the MLRO to the appropriate authorities maintained for a period of 5 years from the date of report.
- Up to date AML Policy and Procedures
The firm also maintains details of all AML training provided to staff as well as copies of the annual report made to the management for a period of 5 years.
All relevant personnel to include staff and contractors are required to undergo anti-money laundering / Countering the Financing of Terrorism training on an annual basis so as to ensure they understand what constitutes money laundering and what their duties are in relation to ongoing monitoring and the recognition and reporting of money laundering and financial crime. New staff also receive this training as part of their induction.