On 3 July 2019, the National Council passed an amendment to the Financial Markets Anti-Money Laundering Act (FM-GwG). The aim of the amendment is to implement Directive (EU) 2018/843 (5th Anti-Money Laundering Directive) on the prevention of money laundering and terrorist financing, which must be implemented into Austrian law by 10 January 2020.
The duties of care and reporting contained in the FM-GwG and the obligations regarding beneficial ownership in the Beneficial Owners Register Act (WiEReG) are the central provisions in Austria for combating money laundering and terrorist financing. The changes in the FM-GwG also take into account the recommendations and interpretations of the Financial Action Task Force (FATF) adapted for this area.
Defining ‘virtual currencies’ and ‘virtual currency service providers’
The amended FM-GwG provides definitions of ‘virtual currencies’ and ‘virtual currency service providers’ and expands the scope of the FM-GwG to subject virtual currency service providers to its provisions. The purpose of extending the scope to virtual currency service providers is to prevent terrorist groups from transferring funds into the financial system of the European Union or between virtual currency networks by either concealing the transfers or taking advantage of the anonymity made possible by these platforms.
According to § 2 no. 21 FM-GwG, virtual currencies are a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.
Virtual currency service providers are, pursuant to § 2 no. 22 FM-GwG, all service providers who offer one or more of the following services:
- services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies (custodian wallet provider);
- exchange between virtual currencies and fiat currencies;
- exchange between one or more forms of virtual currencies;
- transfer of virtual currencies;
- participation in and provision of financial services related to an issuer’s offer and sale of virtual currencies.
New registration requirement
The amended FM-GwG requires virtual currency service providers that intend to perform their activities in Austria or to offer their services from within the country must first apply to the FMA for registration. The application shall be accompanied by the following information and documents:
- the name or company name of the service provider and, if available, the managing director(s);
- the registered office of the undertaking and the business address relevant for service;
- a description of the business model, indicating in particular the nature of the intended services;
- a description of the internal control system that the applicant intends to implement, as well as a description of the strategies and procedures planned to meet the requirements of the FM-GwG and the EU Regulation on information accompanying transfers of funds (2015/847), and
- in the case of legal entities, additionally the identity and the amount of the participation of the owners who directly or indirectly hold a qualifying participation in the applicant pursuant to § 4 para. 1 no. 36 of the Capital Requirements Regulation.
If the FMA has doubts as to whether the requirements of the FM-GwG can be met on the basis of the information and documents provided, or if the FMA has doubts as to the personal reliability of the managing director(s), the natural person holding a qualified participation or the natural person intending to act as such a service provider, the FMA may not carry out any registration (§ 32a para. 2 FM-GwG).
Article 32b FM-GwG was also newly inserted with the amendment. According to this provision, the FMA may prohibit the activities of service providers with regard to virtual currencies without registration. For this purpose, the FMA has the powers pursuant to Articles 22b to 22e FMABG.
A new paragraph 4 was added to § 34 FM-GwG, which imposes a fine of up to EUR 200,000 on persons offering virtual currency services pursuant to § 2 no. 22 FM-GwG without the required registration. The registration obligation enters into force on 10 January 2020; however, voluntary registration will be possible starting 1 October 2019.
The amendments to the FM-GwG subject virtual currency service providers to the same customer identification and due diligence requirements of credit institutions and financial institutions. Generally, virtual currency service providers will have to apply customer due diligence measures when establishing a business relationship or carrying out an occasional transaction of EUR 15,000 or more in value. Virtual currency service providers also will be obliged to identify and verify customers’ identities, assess and obtain information on the purpose and intended nature of the business relationship and source of funds used and conduct ongoing monitoring of the business relationship.
You can read a summary about it here.