Authorities are toughening up on unlicensed crypto asset service providers, slapping them with hefty fines to protect investors and clamp down on money laundering activity.
The move follows instructions and directives from the international money laundering watchdog authorities.
The Finance Ministry has proposed legislation foreseeing fines of up to €350,000 or five years in prison, or both, for Crypto Asset Services Providers (CASP) should they be caught offering services without registering with the Cyprus Securities and Exchange Commission (CYSEC).
It wants to amend the ‘Prevention and Combating of Money Laundering from Illegal Activities of the Law’, which provides penalties for offering investment and other financial sector services without a license from CySEC or the Central Bank.
The bill before the House Finance Committee was drafted based on experiences and penalties imposed on unlicensed CASPs in other EU states.
The proposed amendment to the ‘Prevention and Combating of Money Laundering Act’ comes after recommendations and directives from the Financial Action Task Force (FATF) and MONEYVAL’s report published in November last year.
The Financial Action Task Force, also known by its French name, Groupe d’action financière, is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
MONEYVAL is a permanent monitoring body of the Council of Europe which assesses compliance with the principal international standards to counter money laundering.
According to an accompanying letter submitted by the Finance Ministry, the proposed regulations aim to serve and protect the public interest by minimising the risks of money laundering from illegal activities.
The bill redefines service providers related to crypto assets, who have an obligation to register them.
It also clarifies the need to implement measures of increased due diligence in cross-border relations of response from third countries, based on international standards, but also establishes the obligation of service providers to measure and minimise the risks related to money laundering activities and the financing of terrorism, which arise from new technologies.
As the ministry notes, the heftiest penalties are imposed in Malta, where in case of non-compliance with the legislation on crypto assets, including operating without a license, prison sentences of up to 6 years or a fine of up to €15 million are foreseen.
In Luxembourg, operators of non-licensed crypto asset services providers are hit with fines of up to €5 mln, while in Belgium, penalties range between €400,000 and €800,000.
