Category: European Commission

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What is the 5th Anti Money Laundering Directive?

Categories Blockchain, Cryptocurrency, Regulatory, European Commission, European Parliament, Regulation

What is the 5th Anti Money Laundering Directive?

On the 19th of June 2018, the European Commission published the 5th Anti Money Laundering Directive (5AMLD) in the Official Journal of the European Union. This directive not only provides important updates and improvements to the 4AMLD but it also makes provisions for businesses that are operating within the cryptocurrency sphere.

When the previous Directive was announced in 2015, Bitcoin and some other currencies existed but no one could yet predict how much they, and the blockchain technology that underpins them, would go on to change the world we lived in. Now, in 2018, even if you are not using cryptocurrencies yourself, the chances are that you are, or are about to come into contact with blockchain. With everyone from shipping lines to central banks has begun to adopt this technology. Significant changes were needed to ensure companies operating both within the sector, and the EU is in full compliance with AML requirements.

The 5AMLD is not a ‘free-standing’ law, but rather it provides amendments to the previous 4AMLD, and it was being created at a time that most member states were still implementing the previous one. This was due to the fact that the industry moved at an incredible rate and the EU found itself in a situation where within a few months, the previous legislation had become outdated.

The most important elements of the 5AMLD pertain to the regulation of virtual currencies, information on beneficial owners, the use of prepaid cards, the powers of financial intelligence units, and due diligence for high-risk jurisdictions.

Virtual Currencies

The 5AMLD increases the scope of the EU regulatory perimeter in terms of AML/CFT controls and it makes specific reference to cryptocurrency exchanges as well as those that provide custodian wallet services. Under the new rules, both service providers are now “obliged entities” and are therefore subject to the requirements of the AMLD legislation.

The 5AMLD also requires all Member States to enforce mandatory registration of such providers and to report any suspicious activity that occurs on their platforms. This is designed to stop organised criminal activity from exploiting the anonymous nature of cryptocurrency and blockchain technology.

Beneficial Owners

The 5AMLD makes some very important changes to the EU regulations on both recording and disclosing the beneficial ownership of entities such as trusts and companies. Now, member states will be expected to impose sanctions and restrictions on any company that breaches the basic obligation of holding adequate and up-to-date information who is the beneficial owner.

The Directive also expands on the ability to access information pertaining to beneficial ownership- in the case of a corporate entity, for example, any member of the public is now entitled to the unrestricted information. In the case of trusts, regulators, FIUs and regular entities, as well as any natural or legal person with a demonstrable and legitimate interest, is able to access such information upon request. The EU stipulates that this access should not be limited to cases of pending litigation, but rather to those who facilitate preventative work in AML/CFT, as well as NGOs and investigative journalists.

All information on beneficial ownership is to be held on a central registry and should be available both locally and on a cross-border basis within the EU. All member state registers will be connected via the ‘European Central Platform’ which will be established under the Company Law Directive.

Financial Intelligence Units

Under the new Directive, FIUs will have total access to information provided by any obliged entity including exchanges and wallet providers. Furthermore, the 5AMLD also provides for a situation where information can be obtained by the FIU without any prior report needing to have been made.

Enhanced Due Diligence for High-Risk Countries

The 5AMLD imposes much tougher due diligence criteria on business relationships and transactions that involve high-risk jurisdictions. These requirements include acquiring additional information on the customer as well as the beneficial owner, the sources of funds and wealth, reasons for executing the transaction, and the necessity to have senior management approval to continue the relationship. The Directive also suggests that member states should impose restrictions on transactions or relationships with institutions from high-risk jurisdictions and it may require EU Banks to terminate correspondent banking relationships with institutions that are deemed as operating in a high-risk jurisdiction.

 

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Contact us directly on +356 20103020 or by email at [email protected] to find out more.

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How the EU 5th AML Directive will impact the world of digital currencies

Categories Blockchain, Cryptocurrency, Regulatory, European Commission, E&S Group, Technology, Regulation, Tokens, Wallet

How the EU 5th AML Directive will impact the world of digital currencies

On the 26th of April 2018, the European Parliament announced the Fifth Anti-Money Laundering Directive (5AMLD) which would provide significant amendments and updates to the 4AMLD as well as tackling the growing virtual currency sector. Member States of the European Union have until 2020 to transpose the directive into national law and to make sure that all businesses operating within their jurisdictions are in full compliance.

Providing much-needed clarity

As well as bringing European AML regulations in line with developments in the cryptocurrency sector, the Directive seeks to provide clarity to virtual currency businesses on the AML and CTF obligations that they are required to adhere to.

Bolstering the industry’s reputation

There is no doubt that these regulations are much needed. Many cryptocurrency cynics state the fact that crypto can be and is used for illicit activities as a reason why they do not wish to get involved with them. Many investors and companies are cautious to associate their brand with something that has ties to drugs, money laundering and financing terrorism. Whilst in a reality, the actual number of illicit transactions is much lower and less than people think, regulations like 5AMLD provide a much-needed confidence boost.

The 5AMLD fills a regulatory void that has previously allowed certain rogue entities allow users to exchange crypto for fiat without undertaking any, or little KYC or due diligence. These platforms then became a paradise for virtual currencies gained from dark market places, fraud, ransomware, and other illegal activities.

Two types of crypto-business

The new Directive pertains to two types of cryptocurrency business; providers that are engaged in exchange services between virtual currencies and virtual currencies (exchanges) and those that provide custodian wallet services where clients private keys are stored as a part of the service.

Under the new rules, both of these entities become ‘obliged entities’ and are therefore obliged to comply with the AML/CTF legislation, much in the same way that banks and other financial institutions are. They will also be required to implement stringent issues to counter money laundering and terrorist financing included KYC and strict due diligence as well as transaction monitoring. All entities will also be obliged to keep and maintain extensive records and to report all suspicious transactions immediately to the competent authority.

Pan-European standardisation

Most cryptocurrency businesses that operate within the EU have already implemented such procedures but the 5AMLD seeks to standardise it and ensure that it becomes law within each jurisdiction so that bad actors are prevented from continuing their operations. It is also hoped that the introduction of the 5AMLD will seek to create a European ecosystem that other states can use as a guide when it comes to implementing their own AML procedures.

If you operate or are planning to operate a cryptocurrency business then E&S Group can assist you in being compliant with all current, and imminent regulations. We can provide legal, fiscal, and compliance related advice to help you ensure that you are in adherence to all applicable regulations both locally, and at EU level. For enquires call on +356 2010 3020 or by email on [email protected]

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EU warns that the GDPR could cause a headache for DLT innovation

Categories Blockchain, Cryptocurrency, ICOs, European Commission, GDPR, Smart Contracts, Technology

EU warns that the GDPR could cause a headache for DLT innovation

An EU body – the Blockchain Observatory and Forum has issued a warning that the recently introduced GDPR could cause a significant delay in blockchain innovation.

Due to the lack of legal clarity surrounding blockchain technology as well as exactly how the GDPR will impact its underlying ethos, it has not yet been established how blockchain can exist in compliance with the new laws.

Blockchain in Europe

The report, entitled “Blockchain Innovation in Europe” states that: “As long as the legal framework around personal data and blockchain remains unclear, entrepreneurs and those designing and building blockchain-based platforms and applications in Europe face massive uncertainty. That can put a brake on innovation.”

One of the main issues highlighted in the report arises from the fact that the very essence of the GDPR is the empowerment of individuals to have control over who has their data and to amend it as they wish. Under some circumstances, the GDPR even allows individuals to have their information deleted as and when they choose- this goes completely against the grain when you consider blockchains immutability.

Protection of rights

Another key point of the GDRP is that individual’s data rights are protected and that one single central body can be held accountable when things go wrong. But, when it comes to an open and permissionless blockchain, information is processed across all nodes of the network, therefore there is no centralised data controller.

Lastly, the GDPR states that data is only allowed to be transmitted out of the EEA, if the data protection rules in the jurisdiction it is being transferred to are of the same or a higher level. With open, permissionless blockchains it is not possible to choose where data ends up as the database is replicated on all nodes, regardless of where they are located.

The report states: “The law was conceived and written before blockchain technology was widely known, and so was fashioned with an implicit assumption that a database is a centralized mechanism for collecting, storing and processing data.”

Encouragingly, however, the report does note that blockchain technology is still in its early stages of development and it could yet evolve to help GDPR attain its ultimate goal of data sovereignty.

“Blockchain could, in theory, make it easier for platforms and applications to have this compliance ‘baked in’ to the code, supporting data protection by design.”

If you have any questions in relation to ICOs, please contact us on [email protected]

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Malta announces a delay in the introduction of new gambling regulations

Categories iGaming, Blockchain, Cryptocurrency, Malta, European Commission, The Blockchain Island, E&S Group, European Parliament, Technology, Regulation, Anti Money Laundering, Malta Gaming Authority

Malta announces a delay in the introduction of new gambling regulations

Malta is awaiting the introduction of its new gambling regulations, but news broke on the 28th that these would come a bit later than planned.

The reason for the delay is being cited as comments made by the European Commission and another EU Member State, pushing forward the implementation date to July 16th, and the start date back to August 1st.

The Malta Gaming Authority (MGA) said in a statement:

“Government and the MGA shall be reviewing and taking into account the recommendations made by the European Commission and the Member States.”

According to reports, detailed opinions were forthcoming from Finland, Poland, and the European Lotteries Association- all of which must be duly considered by the Maltese government and the MGA.

The changes to the existing law were proposed back in May 2017 and the new legislation was drafted after an extensive public consultation period with key local and international stakeholders. The new Gaming Act will replace the current rules and it is particularly focussed on licensing and the provision of gambling services. Once it comes into force, it will drastically simplify the licensing system by using just two categories of license- a B2B one and B2C one.

This new act is the first revision of the nations gaming laws since 2004 and as well as simplifying certain areas, it also aims to implement stricter controls and regulations to ensure that the industry is immune from money laundering, terrorist financing and other various financial crimes that are associated with gaming and sports betting.

This news comes alongside the announcement that the Maltese Parliament has approved three acts designed to regulate the cryptocurrency, blockchain, and ICO industries. The Virtual Financial Assets Act, the Malta Digital Innovation Authority Act, and the Innovative Technology Arrangement Act will seek to provide much sought after regulatory clarity, as well as providing support and encouragement for the burgeoning sector.

This is a world first and has put Malta on the map in the world of crypto and blockchain with the small EU state even being dubbed as the “Blockchain Island”.

With these new pieces of legislation for both the iGaming industry and the blockchain and cryptocurrency industry, it places Malta at the forefront of these disruptive and progressive global industries.

E&S Group can help operators within both industries set up their operations in Malta. We can assist with opening a company, applying for applicable licenses, adhering to regulations, and providing tax planning and associated services. To find out more, contact us on +356 2010 3020 or by email on [email protected]

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European Parliament says that crypto is not likely to challenge central banks

Categories Blockchain, Cryptocurrency, European Commission, Bank, European Parliament, Technology

European Parliament says that crypto is not likely to challenge central banks

In a report released by the European Parliament, they have stated that they do not believe that cryptocurrency has the power to challenge the dominance of central banks.

The most recent Monetary Dialogue report was issued on June 26th and the European Parliaments Committee on Economic and Monetary Affairs said that whilst cryptocurrencies have significantly improved the safety, speed, and transparency of financial transactions, it is unlikely that they pose a threat to fiat currencies.

Positive attributes

This analysis was carried out by the Centre for Social and Economic Research, a not-for-profit research institution that is based in Poland. Early on, they noted the positive changes that cryptocurrencies could bring to transactions and also stated that they are used globally with no limitations on borders or geographical constraints.

Real market demand

The report states that cryptocurrencies respond to “real market demand” and that there is every chance they have the potential to become a fully-fledged private money as well as an integral part of the global economy. The report then goes on to state that whilst this is all positive, it remains unlikely that cryptocurrencies will pose a threat to central banks and traditional fiat currencies, especially in countries where sovereign currencies are very popular.

Despite the widespread popularity of fiat currencies, there are a few exceptions. Countries such as Venezuela is a small jurisdiction but the sovereign currency is incredibly volatile. In a case such as this, cryptocurrencies could offer a valid alternative to unstable fiat currencies.

 

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European banks complete the very first live, blockchain financial trades

Categories Blockchain, Cryptocurrency, European Commission, Bank, Trading, Regulation

European banks complete the very first live, blockchain financial trades

A group of European banks have announced that they have completed the very first, live blockchain-based trans-border transactions. The trades in question were made via a jointly developed we.trade blockchain platform.

These real-life trades were executed over the previous five days amongst 10 companies and were facilitated by four leading banks that utilised the blockchain-based platform. HSBC, one of the institutions that are using the platform, has claimed that three of its clients have been able to complete an open account transaction via we.trade, in Europe.

We.trade is build on the IBM Blockchain Platform using its Hyperledger Fabric technology. It was created and developed by Deutsche Bank, HSBC, KBC, Natixis, Nordea, Rabobank, Santander, Societe Generale, and UniCredit, with the purpose of boosting the efficiency of cross-border transactions in the financial sphere.

As reported back in April, we.trade was supposed to start testing the platform in May with an expected commercial implementation due in the summer. Back then, Societe Generale told the press that the reason for the quick development of the platform was due to the fact that it was designed to be used by SME’s trading within Europe.

IBM’s blockchain lead in Europe, Parm Sangha stated:

“As we.trade has moved from pilot applications to conducting live transactions across borders, it has demonstrated the power of blockchain technology in an enterprise setting.”

The platforms Chief Operating Officer has announced that the next step will be to encourage buy-in from other EU banks and clients further afield.

 

Interested in ICOs Legislation in Malta? Contact us directly on +356 20103020 or by email at [email protected] to find out more.

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European MEP’s agreed on stricter regulations on cryptocurrencies.

Categories Cryptocurrency, European Commission, European Parliament

European MEP’s agreed on stricter regulations on cryptocurrencies.

During a sitting at the European Parliament on Thursday, 19th April 2018, MEPs voted for stricter regulations in the crypto sector. Through this directive, crypto exchanges and wallet providers will be subjected to closer regulations. The European Union is taking such measures to help trace and detect money laundering and terrorism activities.

This directive will form part of the already existing EU Anti-Money Laundering Directive. In addition, the passed law is going to investigate cryptocurrency users, where they need to apply and register themselves for further due diligence procedures prior to exchange cryptocurrencies and services. Additionally, crypto users cannot remain anonymous on the platform; authorities need to keep track who is trading or using these virtual currencies.

During the sitting, Member of the European Parliament (MEPs) reduced the threshold to identify prepaid and virtual cardholders from €250 to €150. The European Union believes that there are “risks linked to virtual currencies” need to be addressed.

Why did MEP’s see the need to pass this directive?

These measures have been introduced to trace illegal doings happening within EU member states. Through this directive, terrorist activity in European countries can be easily traced before it happens. Krišjānis Kariņš, co-rapporteur on the amendments stated that “Criminals use anonymity to launder their illicit proceeds or finance terrorism.” Through this directive, Mr Kariņš believes that it will “address the threats to our citizens… by tightening rules regulating virtual currencies and anonymous prepaid cards.”

Judith Sargentini stated that “We lose billions of euros to money laundering, terrorism financing, and tax evasion – money that should go to fund our hospitals, schools and infrastructure. We introduced tougher measures, widening the duty of financial entities to undertake customer due diligence. This shine a light on those who hide behind companies and trusts and should keep our financial system clean.”

The EU has already set frameworks to improve better blockchain connectivity within member states. In fact, last week, 22 European countries signed an agreement on the launch of the EU-wide Blockchain applications. Although this agreement does not speak about cryptocurrencies, it’s aim is to provide a single market within its member states using blockchain technology.

E&S Group is a leading law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

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Malta amongst 22 nations to sign The European Blockchain Partnership.

Categories Blockchain, Cryptocurrency, Regulatory, European Commission

Malta amongst 22 nations to sign The European Blockchain Partnership.

The European Commission has taken a positive stance with regards to Blockchain and FinTech technologies. It was only last February, since the EU Commission launched the EU Blockchain Observatory and Forum, helping European actors to engage in Blockchain.  Moreover, the Commission is structuring European crowdfunding for businesses through FinTech (Financial Technology). Europe’s vision is to provide a single market through a blockchain platform among European nations. Earlier this week, 22 European countries, including Malta, signed The European Blockchain Partnership in the hope to cooperate through a developed blockchain system.

In a press release, the Commission stated that through this Partnership it would generate more cooperation among EU states.  Also, Blockchain and distributed ledger technology will provide an “exchange and expertise in technical and regulatory fields and prepare for the launch of EU-wide blockchain applications across the Digital Single Market.”

Where is the EU heading?

In recent months, the European Commission released its vision in blockchain technology. The member states will be helping the Commission to remain in the forefront in blockchain development.

They continued by stating that:

“Europe is well placed to take a global leadership position in the development and application of blockchain and distributed ledger technologies.”

Moreover a “better control of data by citizens and organisations interacting with public administrations, reducing fraud, improving recordkeeping, access, transparency and auditability, within and across borders,” signatories continued explaining.

The European Commission declared that it wishes “to launch the first crossborder actions by the end of 2019.

What will Malta benefit from this Partnership?

As mentioned above, Malta signed the European Blockchain Partnership. In this agreement, Malta will obtain better blockchain connections with other EU states. Malta is positioning itself attracting established blockchain crypto exchange companies to open up their offices on the island. The Maltese government wants the island to become a leader jurisdiction in blockchain technology.

E&S Group is a leading law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

For more information click the link.

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Good news for the Maltese tonnage tax system.

Categories Tax, European Commission, Malta tonnage tax, Income tax

Good news for the Maltese tonnage tax system.

The European Commission has concluded their decision with regards to Maltese tonnage law. This inspection has been ongoing since October 2011 and was finalised on the 7th of February 2018. In fact, during the assessment the Commission found that Malta’s tonnage tax system is in line with the Maritime guidelines that were issued back in 2004.

With Malta having by far the largest ship registry in Europe, its general cargo, car carriers, bulk carriers, containers and passenger vessels will remain exempt from Malta’s income tax.

Such exemptions include; relevant fees paid to Transport Malta and maintenance of separate accounts which are used as ring-fencing activities. This said, the Commission has reviewed all fees paid to Transport Malta and will accept the Commission’s final decision, thus providing legal certainty to Maltese tonnage tax.

Maltese registered vessels are required to be in full compliance with the below-mentioned rules. The European Commission will send vessel information gathered from shipping companies to Maltese authorities. This information should include: type of vessel, the activities performed with the vessel, the net tonnage, days in use, flag state and types of operation. Moreover, directors of these shipping companies need to stay updated if further changes may occur. Below is a list of Malta’s exemption of income tax approved by the European Commission:

  • Ship owners leasing a bareboat to group companies will generate some income.
  • When leasing a boat, it does not have to exceed 50% of the total fleet, (this is calculated on a group basis);
  • Income gathered from cruises and ancillary services to cruises, (ancillary services are spa, hairdressing services etc…) the total revenue for each ship cannot exceed 50% of the total revenue;
  • Income generated from gambling/betting and other luxury goods should be less than 25% of the ships total revenue;
  • Commercial yachts need to be registered with Transport Malta;
  • Tugboats and dredgers representing maritime transport need to provide more than 50% of operational;
  • Self-propelled barges that are designed and normally used for navigation in open seas;
  • Time/voyage chartering in of vessels is also possible provided that the flag link requirements are met;
  • Dividend distributions from shipping companies;
  • Capital gains on the sale of tonnage tax ships which are engaged in genuine shipping activities; and
  • Interest derived from working capital of shipping companies.

In contrast, the below do not fall within the Maltese tonnage tax system.

  • Fishing and fish factory ships;
  • Private yachts and ships used primarily for sport or recreation;
  • Fixed offshore installations and floating storage units;
  • Non-ocean going tugboats and dredgers;
  • Ships whose main purpose is to provide goods or services normally provided on land;
  • Stationary ships employed for hotel and or catering operations (floating hotels restaurants); and
  • Ships employed mainly for gambling/as casinos (floating or cruising casinos).

The European Commission drafted tonnage laws solely for Malta which has put Malta in a competitive advantage from other EU states. By this ruling, the island will see an increase in shipping registry.

If you want to know more about the Yachting industry in Malta, contact us by email on [email protected] or visit this link to know more.

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The GDPR – A New Era in Data Protection Law

Categories European Commission, Law, GDPR

The GDPR – A New Era in Data Protection Law

In today’s day and age, companies and businesses are relying more and more on data processing of their clients, which is why every company and business must be aware of the latest development in data protection law: the General Data Protection Regulation (the ‘GDPR’).

The GDPR:

  • Establishes new rights for data subjects (such as the right to be forgotten), and new obligations for data processors and controllers,
  • Protects personal data and sensitive data (including geometric and biometric data),
  • Applies to all operations collecting personal data from individuals who are within Member States, whether the controllers/processors are based in the EU or not,
  • Imposes hefty fines and penalties for non-compliance with this regulation, with the highest possible fine reaching €20 million.

The compliance deadline as set in the GDPR is the 25th of May, 2018. This means that all companies and businesses must bring all their policies in line with the GDPR by that date, or face severe fines for non-compliance.

What is contained in the GDPR?

A number of principles are given the utmost importance in the GDPR. Data must be processed lawfully, fairly, and in a completely transparent manner. Purpose and storage limitation must also be limited – only the data for a specific purpose should be collected. Any extra data collected is a liability for the company. Furthermore, companies must ensure to the best of their ability that the data collected is accurate.

The GDPR encourages data stored to be as secure as possible by using pseudonymisation or ensuring that data is not identifiable as much as possible.  Consent, as a key element of data collection and processing, cannot be obtained through pre-ticked boxes, or any default forms of consent (such as silence) – the data subject must be fully aware as to what he/she is consenting to.

It’s also important to note that the protection of data subjects has significantly been boosted due to the inclusion of their rights in the regulation, such as right to access their personal data easily, quickly, and free of charge, right to erase their personal data if they wish, and right of data portability. Those rights, combined with the obligations of data processors, have defined a new era in data protection law.

In complying with the GDPR, companies ensure accountability, security, and confidentiality with their clients, boosting their client relationship as well as their overall reputation. This, apart from the hefty penalties for non-compliance, is why it is of the utmost importance for any business to ensure the best awareness possible of the new rights given to data subjects, and the obligations their company will have to adhere to.

Speak to us! If you require further information with regards to the General Data Protection Regulation please send us an email on [email protected]

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