On the 1st of November, 2022, new AML requirements for Lithuanian crypto service providers came into force. Among organizational, reputational and capital requirements that apply to the crypto service providers, these amendments mainly focus on and establish new requirements for the client onboarding process.
Which KYC Regulations are Applicable to Crypto Service Providers?
Virtual asset service providers must implement the following KYC steps:
- Take the required steps to identify the customer and verify the customer’s identity on the basis of documents provided by the potential client;
- Use information obtained from a reliable and independent source to verify the data provided by the client;
- Identify the ultimate beneficial owner that receives the real benefit from the operation and/ or transaction;
- In the case of corporate clients, identify the representative of the client and understand the nature of the representation;
- Run the required screenings (like sanctions screening, PEP screening and etc.) in order to identify if there are any other important risk elements associated with the potential client;
- Store and manage the data collected during the KYC process for future reporting and audit purposes.
As a general rule, these requirements are applicable to any virtual asset exchange and transaction equal to or exceeding seven hundred euros or the equivalent amount in foreign or virtual currency per day. This is foregone if the customer and beneficiary have already been identified.
As for acquisition transactions from an initial virtual currency offering (ICO), these requirements will be applicable to amounts equal to or greater than 3 000 euros or the equivalent amount in virtual currency per day. This means that any operation of that sum will first need to be met with the above-mentioned steps. The operator of the virtual currency exchange and the operator of virtual currency wallets are prohibited from opening anonymous accounts or accounts under obviously fictitious names. This also forbids starting business relations without requesting data confirming the identity of the client or if there is reasonable suspicion that the data recorded in these documents is falsified.
Implementation of the Newest Regulations
Considering the digital nature of virtual currency operations, crypto players might find it difficult to adapt to the processes that aren’t well designed to address the particularities of the industry. They will require special attention and adaptation from the crypto industry in order to avoid non-compliance and regulatory fines.
Still, there is a silver lining. Although new to the crypto market, these requirements have been applicable to the traditional financial services industry for many years. This means the Know Your Customer (KYC) processes are already well established in traditional financial services. This should make them fairly easy to implement and understand the expected level of standard of KYC processes. The classic KYC process combines different steps that help identify the client, understand the intention behind them using the services as well as define and manage the risks related to the client.
Remote Identification Processes
As virtual asset services mostly rely on remote processes, it’s important to look into the requirements for remote identification. Any remote identification solution must comply with the Resolution of the FUI of the Republic of Lithuania “Regarding the adoption of the technical requirements for the process of establishing the identity of a customer by remote identification using electronic means capable of live video transmission”. In layman’s terms, the resolution states, besides other available identification methods, that the client’s facial image and original identity document must be captured using video streaming. The video streaming must be direct and live, which means that videos or photos outside of live video streaming will not be accepted.
The Most Efficient Way to Implement KYC Processes
Ondato OS is an all-in-one solution that can help you to automate the mandatory KYC process and ensure full compliance with the applicable regulations. Ondato OS will enable you to implement a fully remote onboarding process of the client. Afterwards, we will run all the integrated searches and checks using any mandatory, reliable and independent sources to confirm the data provided by the client. Ondato OS will inform you about the risks associated with the client. This way, you can easily manage all the data in one platform and ensure the continuous review of the risks associated with your clients. Luckily, Ondato has experience in this field and has helped many clients to address the new requirements.