Companies working in Blockchain and cryptocurrency-related domains presently operate in a dynamic sphere of regulatory uncertainty which requires them to always be on their toes. In addition to the cryptocurrency-specific regulations, licencing and regulatory requirements under different areas of law including corporate laws, taxation, banking and payment regulations, foreign exchange management etc. may apply to crypto projects depending on the business activities of the projects. Compliance obligations under different statutes can be different in nature and may broadly be categorized into compliances related to registration or licence, maintenance of record/register, filing or forms/returns, deposit of recurring fees, display requirements, technical security standards or procedural compliances.
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Regulators are intensifying supervision and enforcement of anti-money laundering (AML) laws, aiming for a zero-tolerance approach to criminal activity. As cryptocurrency usage expands, service providers face increased challenges from money launderers exploiting the speed and anonymity of online virtual asset transactions. Users engaging in buying and selling cryptocurrencies rely on online wallets and exchanges, enabling swift global transfers outside traditional financial systems. The absence of robust regulatory oversight in these platforms attracts money launderers, drawn to the opportunity to convert illegal funds into cryptocurrency and evade AML checks imposed by traditional financial institutions.
Exchanges typically employ dedicated software to investigate illicit activities, such as money laundering and terrorist financing. This software screens potentially risky cryptocurrency transactions to ensure adherence to regulatory standards and monitors both transaction and user risk. The system is designed to identify red flags across various aspects, including transaction types, patterns, anonymity, senders and recipients, source of funds, and geographical risks. It underscores the adaptation of traditional criminal strategies to the crypto landscape and outlines specific behaviours indicative of money laundering. Notable red flags encompass activities like structuring transactions to avoid reporting thresholds, exhibiting unusual transaction patterns, and exploiting the anonymity features inherent in cryptocurrencies.
At Crypto Legal, our dedicated team of solicitors specialises in guiding individuals and businesses through the complex landscape of Anti Money Laundering (AML) laws and Know Your Customer (KYC) regulations within the evolving crypto legal framework. We understand the critical importance of compliance with AML and KYC regulatory standards to help our clients avoid legal complications, audits, and criminal charges.
AML and KYC Compliance Services:
Legal Guidance and Compliance:
Our team of legal experts provides meticulous guidance and unwavering support to guarantee the seamless alignment of your business operations with Anti Money Laundering (AML) laws and Know Your Customer (KYC) regulations. We offer strategic counsel to assist you in deftly navigating the complexities of compliance, providing valuable insights into resolving inquiries and meeting requirements related to Source of Income and Source of Wealth, particularly those that might be requested from various crypto exchanges. Our overarching goal is not only to deepen your understanding of regulatory requirements but also to proactively mitigate potential risks with effectiveness and precision.
Audit Preparedness:
Crypto Legal assists individuals and businesses in preparing for AML and KYC audits. We understand the nuances of regulatory inspections and work proactively to ensure our clients are well-prepared to address any scrutiny effectively.
Account Freezing Orders and Forfeiture Defence:
Our firm specialises in defending against Account Freezing Orders and Account Forfeiture Notices and Orders, as outlined in the Criminal Finances Act 2017. We provide representation for commercial enterprises, high-net-worth individuals, politically exposed persons, and their associates.
Challenges to Orders:
We have a proven track record of mounting successful challenges to freezing orders, including applications to set aside the order or contesting extensions. Our team is skilled in engaging with investigators to demonstrate the legitimacy of funds and argue against unnecessary orders.
Appeals Against Forfeiture:
In cases where Account Forfeiture Orders are issued, we offer representation and assistance in appealing against forfeiture, understanding the higher evidence bar required for such cases.
KYC Implementation:
Crypto Legal provides comprehensive support in implementing effective Know Your Customer programs. We guide businesses through the twelve key components of a KYC program, ensuring proper identification, risk categorisation, and due diligence.
AML Risk Assessment:
Our experts conduct thorough AML risk assessments, categorising risks into High, Medium, and Low. This assessment informs the frequency and thoroughness of periodic KYC reviews.
Documentation Support:
We assist clients in organising and maintaining necessary documentation for AML compliance, including customer profiles, registration numbers, and associated party information.
Litigation Counsel:
Our services extend to acting as litigation counsel for clients involved in claims related to AML obligations, fraud, and financial crime matters.
At Crypto Legal, we bring extensive experience and expertise to address the complete range of AML issues across jurisdictions. Contact us for proactive legal support in navigating the challenges of AML compliance and safeguarding your business from legal complexities.
From a regulatory perspective, designing the corporate structure of a blockchain-based startup is arguably the most important preliminary step. The number of entities required and their functional interaction must be delineated carefully, depending on the nature of their business offerings, technical operations, customer interactions and tax implications.
Not only do we advise blockchain-based projects on their incorporation strategies (in sectors ranging from web3, NFTs and DeFi), but we also set up bespoke structures for them in light of applicable laws. Specifically, the latter include regulations on digital assets, securities, banking and payment systems and taxation, among others. We work closely with partner counsels and consultants from various jurisdictions to ensure a smooth and expeditious incorporation process. Some of the specific jurisdictions we focus on include Dubai, Singapore, the British Virgin Islands (BVI), the Cayman Islands, Saint Vincent and Grenadines (SVG), the USA (Delaware & Wyoming), Malta and Switzerland.
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Many cryptocurrency projects involve issuing a native cryptocurrency or token which helps them raise funds for further growth, development or maintenance of the network/project/ecosystem. The platform and manner adopted to launch the cryptocurrency tokens have undergone significant changes compared to the initial trend that started in 2016 – 17.
Initial Coin Offerings (ICO) happened to be the most popular choice to raise funds initially, however, other methods including Initial DEX Offering (IDO) and Initial Exchange Offering (IEO) are also being frequently opted now by the crypto projects. Many of the DeFi platforms which encourage buyers of the tokens to contribute to the liquidity pool of the protocol choose to sell tokens through Initial Liquidity Offering (ILO).
ICOs and other forms of Token sale are now regulated in many jurisdictions and certain cryptocurrency tokens having characteristics of securities may trigger additional registration approval requirements. In a few jurisdictions like the USA, ICO is to be mandatorily registered before being offered to the public. There are also many jurisdictions where the launch of Tokens through ICO / IDO / IEO / ILO / INO are unregulated as there are no specific regulations in this regard; however, registration and certain compliances under securities and under laws may get triggered depending on the functions, utility and characteristics of the particular token.
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Juristically speaking, contracts are the lifeblood of any business. Crypto startups are no different. Right from incorporation they need to enter into a multitude of agreements for internal as well as external functioning. They must enter into contractual relations both with natural persons (employees, partners, directors, promoters etc.) as well as juristic entities (third parties, service providers, creditors, customers etc.) in order to clarify their rights and obligations in light of applicable laws.
Well-designed contracts must strike a delicate balance between long-term goals and day-to-day conveniences. They must not only foresee, and guard against, extant legal risks, but also have a keen eye on emerging regulatory developments in the space.
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It is now a truism that both institutions and governments are realising the economic efficiency as well as the ethical promise of blockchain technologies. As a result, the latter has seen a remarkable rise in adoption over the last few years, spurred on by a post-pandemic reality in which the digital realm has become the primary medium for all forms of intersubjective interactions. This shift has raised lots of new challenges for policymakers in diverse domains. From the digital divide to the great reset, questions of equality, justice, efficiency and access in the realm of technology have become pivotal questions for business leaders and statespersons across the world.
At Crypto Legal, we pay close attention to this developing landscape and provide well-grounded opinions on complex policy questions. In this endeavour, we work closely with academic partners, think tanks and advocacy groups.
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