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11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Crypto Asset Service Providers and Funding Companies Listed as Obliged Persons under Regulations on Prevention of Laundering Proceeds of Crime

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Compliance
General

Recent Development

Official Gazette No. 31405 (Additional Issue No. 2) dated 24 February 2021 amended the Regulation on Measures regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism (“Measures Regulation”) and thereby expanded the scope of Article 4 of the Measures Regulation, which enumerates the obliged persons. These changes entered into force on 1 May 2021. You may find the details of the amendments in our previous legal alert.

On 1 May 2021, a new regulation altering the recently amended Measures Regulation (“Amendment Regulation”) was published and entered into force. The Amendment Regulation expanded the scope of Article 4 even further. According to the Amendment Regulation, starting from 1 May 2021, the below listed companies will be considered obliged persons under Article 4 of the Measures Regulation.

  1. Crypto asset service providers, and
  2. Financing companies.

On 4 May 2021, the Financial Crimes Investigation Board released two guidelines for crypto asset service providers and financing companies, thoroughly explaining the obligations and the foreseen sanctions for violations.

Even though the Amendment Regulation does not provide a definition of what constitutes a crypto asset service provider, crypto assets are defined under the Regulation Prohibiting Payments With Crypto Assets (“Crypto Assets Regulation”) published by the Central Bank of the Republic of Turkey on 16 April 2021. The Crypto Assets Regulation defines crypto assets as “intangible assets that are created virtually using distributed ledger or similar technologies and are distributed over digital networks, and that are not qualified as money, registered money, electronic money, payment instrument, security or any other capital markets instrument”. You may find further details regarding the Crypto Assets Regulation in our previous legal alert.

Conclusion

Starting from 1 May 2021, crypto asset management and financing companies must comply with certain obligations regulated under Law No. 5549 on the Prevention of Laundering Proceeds of Crime and the Measures Regulation, including, but not limited to, identification of customers and actual beneficiaries, notification of suspicious transactions, and providing continuous information as expected from the other legal and natural obliged persons enumerated under Article 4 of the Measures Regulations.

The recent amendments to the anti-money laundering regulations gradually broadened the scope of the obliged persons and increased the scope of obligations that obliged persons must comply with. We can interpret this latest change as an attempt by the Ministry of Treasury and Finance and the Financial Crimes Investigation Board to extend their activities against money laundering and terror financing. Therefore, it is also reasonable to expect further amendments to the anti-money laundering and combating the financing of terrorism regulations increasing the number of obliged persons and obligations. Additionally, crypto asset service providers should carefully follow the upcoming developments on the implementation of the above-described obligations, especially for transactions involving anonymity and cryptography caused by the nature of the blockchain technology. Obliged persons must follow these amendments very closely to avoid violating the above-mentioned laws in the future.