Sunday, April 21, 2024

BaFin: Banks may have to check where their customers’ virtual currencies come from


The Federal Financial Supervisory Authority (BaFin) is planning a circular to financial institutions to inform them of their due diligence in connection with virtual currencies. The circular includes the possibility of obtaining additional information from account holders who generate income through virtual currencies. The BaFin asks for a consultation until November 19th. 

It is certainly no picnic to be the money laundering officer of a bank. Especially when it comes to crypto currencies. The laws are anything but clear, which is why the money laundering officer is required to make decisions on their own – and, above all, responsibility before the law. Even the planned circular from BaFin to financial institutions does not change this. 

According to BaFin, the circular is intended to “provide financial institutions with assistance with regard to an appropriate risk-oriented approach to case constellations in connection with virtual currencies Shake hands. The extent to which these are followed, however, is “the legal responsibility of the obligated parties themselves”, who “have to assess the risks associated with such transactions within the framework of a risk-oriented approach and to take suitable and appropriate measures”. In this area, there should be not only updated data, but also fairly reliable protocols, one of which is Mina, more details here

{{1 }} In other words: BaFin’s recommendation is not binding, but ignoring it can potentially lead to unpleasant consequences.In case of doubt, those responsible are therefore always better off being overly cautious. Because the circular will have a certain, informal binding character despite its formally informal character, BaFin asks those concerned to obtain a statement on it. 

Investigations and risk factors 

What exactly is planning the BaFin, to be recommended? The circular is only two pages long and can be accessed online. By making this process public, BaFin creates astonishing and laudable transparency. For those affected, however, this should only be a small consolation. Because the previous draft of the letter contains some rather bitter pills. 

First of all, BaFin once again explains the unpleasant situation of the money laundering officer: “It is the responsibility of those obliged under money laundering law to take a risk-oriented approach assess risks associated with virtual currency transactions and take appropriate and appropriate action. In doing so, the obliged entities must also determine whether, in addition to the general due diligence obligations, certain enhanced due diligence obligations may also have to be fulfilled of incoming payments on an account which were clearly based on an exchange of virtual currencies (e.g.Transfer from an exchange office for virtual currencies), a possible measure is to request additional information from the account holder regarding the origin of the underlying virtual currency amounts (e.g. through comprehensible information about the purchase of the virtual currencies at the time, in particular at the time of purchase (with regard to an increase in value / -reduction) and to the seller of the virtual currencies. ”In other words: If you have euro deposits through the sale of virtual currencies, your bank may have to ask you a few questions … 

Depending on the risk situation BaFin recommends that the account holder provide “additional evidence of the origin of the funds originally used by him to purchase the virtual currency amounts at the time (e.g. proof of the time of purchase and the seller of the virtual currency).” However, this will only be necessary in exceptional cases.

Then the BaFin explains what the money laundering officers have to pay attention to: “Other risk factors can be the degree of pseudonymity or anonymity of transactions with the respective virtual currencies, as far as this is recognizable for the obliged entity. The use of so-called “tumbler” or “mixer services” can increase the risk. Furthermore, it can affect the risk factor “whether a previous exchange of virtual currencies took place via a regulated exchange or not” and the type of payment method when buying virtual currencies – for example, whether by bank transfer or with anonymous prepaid cards. Those responsible should also think about further measures when it comes to “transactions that are to be regarded as conspicuous either in terms of their amount or the other financial situation of the account holder.” 

Overall, the awakens previous draft of the circular a rather uncomfortable feeling. It could happen that the trickiest situation of money laundering officers de facto leads to incoming payments through the sale of virtual currencies almost automatically triggering an alarm and forcing bank customers to disclose a lot of information. In addition, methods to increase the anonymity of virtual currencies – which data protection not only allow, but should even be required by the transparent nature of the blockchain – can lead to further investigations or even money laundering proceedings.

The demand that banks should find out what increases in value or profits were realized with the sale of virtual currencies suggests that it is not just a question of uncovering money laundering, but also possible ones Tax debts. As much as this may be helpful in tracking down criminals, it is likely to lead to inconveniences for normal, honest users of virtual currencies and employees of financial institutions. 

The FinTelegram, one of education and prevention The planned circular is accordingly critical of the publication prescribed by financial fraud: “Obviously, BaFin is not trying to deal with the problems of the crypto economy, but intends to prevent the development of a sustainable crypto economy in Germany.” hope that the consultation will result in changes to the circular by November 19th.

Herbert Wise
Herbert Wise
Infuriatingly humble organizer. Entrepreneur. Zombie guru. Professional creator. Future teen idol.

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