A startup virtual currency exchange that operates as a money services business (MSB) must comply with the anti-money laundering (AML) regulations and standards applicable to MSBs, such as the Bank Secrecy Act (BSA) in the United States. One of the key requirements for MSBs is to develop and implement an effective AML compliance program that covers the following four pillars: internal controls, independent testing, designated compliance officer, and training12.
Before launching its operations, the startup should consider the following two AML responsibilities that are essential for its compliance program:
A customer onboarding process: The startup should establish a customer identification program (CIP) that verifies the identity of its customers and collects relevant information, such as name, address, date of birth, and identification number12. The startup should also perform customer due diligence (CDD) and enhanced due diligence (EDD) for higher-risk customers, such as those who engage in large or frequent transactions, use anonymous or pseudonymous digital wallets, or originate from high-risk jurisdictions34. The startup should also screen its customers against sanctions lists and other watchlists to prevent dealing with prohibited or suspicious entities12.
Transaction limits consistent with risk appetite: The startup should set appropriate transaction limits for its customers based on its risk assessment and risk appetite. Transaction limits can help mitigate the exposure to money laundering and terrorist financing risks, as well as comply with the reporting and recordkeeping obligations under the BSA. For example, the startup should report any cash transactions over $10,000 or any suspicious transactions over$2,000 to the Financial Crimes Enforcement Network (FinCEN)12. The startup should also monitor its customers’ transactions for any unusual or inconsistent patterns or behaviors that may indicate money laundering or other illicit activities34.
1: ACAMS CAMS Certification Package - 6th Edition, Chapter 6: AML Compliance Program, pp. 139-1461
2: ACAMS CAMS Certification Video Training Course, Module 6: AML Compliance Program, Lesson 6.1: The Four Pillars of an AML Compliance Program3
3: ACAMS CAMS Certification Package - 6th Edition, Chapter 4: Customer Due Diligence, pp. 87-1061
4: ACAMS CAMS Certification Video Training Course, Module 4: Customer Due Diligence, Lesson 4.1: CustomerIdentification Program and Lesson 4.3: Enhanced Due Diligence3
