Important Anti-Money Laundering Responsibilities for Startup Virtual Currency Exchange
Question
A startup virtual currency exchange has registered as a money services business and will commence operations in six months. The company will provide digital wallets to customers to hold their virtual currency after purchase. Customers will have the option to conduct purchases of the virtual currency and transfer the currency to and from the digital wallet. The startup must develop an anti-money laundering compliance program prior to launch.
Which two anti-money laundering responsibilities should be considered before business launch? (Choose two.)
Answers
Explanations
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A. B. C. D.BD
As a startup virtual currency exchange that will be providing digital wallets to customers, it is important to establish an anti-money laundering (AML) compliance program prior to launch. Two AML responsibilities that should be considered before business launch are:
A. A customer onboarding process: The customer onboarding process is a crucial step in preventing money laundering activities. The startup virtual currency exchange must establish a robust customer onboarding process to ensure that customers are legitimate and not involved in any illicit activities. The onboarding process must include Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures. KYC is the process of verifying the identity of the customer, while CDD is the process of assessing the risk associated with the customer. The startup must establish a risk-based approach to customer due diligence to ensure that high-risk customers are subject to enhanced due diligence measures.
B. Transaction limits consistent with risk appetite: The startup virtual currency exchange must establish transaction limits that are consistent with its risk appetite. The transaction limits must be based on the risk associated with the customer, the type of virtual currency being traded, and the country where the customer is located. The startup must also establish thresholds for suspicious activity reports (SARs) and currency transaction reports (CTRs). The thresholds must be consistent with the regulatory requirements in the country where the startup is operating.
C. Employees to handle complaints in a timely fashion: While handling complaints in a timely fashion is important, it is not a specific AML responsibility that must be considered before business launch. However, it is important for the startup virtual currency exchange to establish a process for handling complaints from customers related to AML compliance.
D. Mechanisms to monitor and protect customers' digital wallets from cyber-attacks: Although mechanisms to monitor and protect customers' digital wallets from cyber-attacks are important for the overall security of the platform, they are not specific AML responsibilities that must be considered before business launch. However, it is important for the startup virtual currency exchange to establish a process for detecting and reporting suspicious activities related to cyber-attacks.
In conclusion, the two AML responsibilities that should be considered before business launch for a startup virtual currency exchange that will provide digital wallets to customers are a customer onboarding process and transaction limits consistent with risk appetite.
