JPM Partner Jelena Stankovic Lukic on full harmonization with international standards in this area, the obligations of providers of services, and the supervision on providers.
The reason for the adoption of the Law on Amendments to the Law on Prevention of Money Laundering and Terrorism Financing is harmonization with the new Law on digital assets, which introduces new legal institutes in the Serbian legal framework. The amendments of the Law on the Prevention of Money Laundering and the Financing of Terrorism entered into force on 29 December 2020 and shall become applicable as of 29 June 2021. By-laws should be harmonized with the new provisions within three months.
The reasons for the adoption of the Law on Amendments to the Law on Prevention of Money Laundering and Terrorist Financing are harmonization with the new Law on digital assets, which in detail regulates the issuance and trading with digital assets, services thereof and companies that can provide such services. At the same time, full harmonization with international standards in this area is defined by the FATF (Financial Action Task Force) recommendations (Recommendation 15), and the provisions of the Fifth Directive on the Prevention of Money Laundering and Terrorist Financing were also taken into account.
The Law on digital assets, applicable as of 29 June 2021, introduced new legal institutes in the Serbian legal framework such as digital assets, virtual currency, digital tokens, the offering of digital assets, services related to digital assets, etc. By the latest amendments of the AML/CFT Law, the provisions regulating actions and measures for the prevention and detection of money laundering and terrorism financing have been supplemented to include digital assets and transactions with the digital assets.
The previous definition of virtual currency has been amended in a way that terms digital assets, virtual currency, digital token, transactions with digital assets, the offering of digital assets, issuer, and address of digital assets have the meaning defined in the Law on digital assets.
The obligations of providers of services related to digital assets are regulated primarily in terms of the obligation to obtain data on the participants in the transaction, on the initiator of the transaction, or the user of the transaction. By checking the accuracy and truthfulness of the collected data and the identity of the participants in the transaction, the transaction can be further implemented.
If it is determined that accurate data are not disclosed, the service provider will proceed in accordance with the procedure for dealing with such situations. Based on a risk assessment, it would be the obligation of the service provider to refuse or suspend the execution of the transaction.
The provision of services related to digital assets that directly or indirectly allow the concealment of the identity of the client, as well as transactions with such digital assets, is prohibited.
In case that the risk analysis estimates a low risk of money laundering or terrorist financing, the provider is not obliged to establish a business relationship with the client and/or perform actions and measures of customer due diligence actions and measures in connection with that business relationship, subject to prior notification to the supervisory authority and subject to fulfillment of preconditions regarding the value of the transaction, tested technical solution enabling delivery of customer personal identity document and the possibility of identifying suspicious transactions.
In addition to data on participants in the transaction, the obligation also includes obtaining the addresses of digital assets that the party uses to execute the transaction with digital assets.
The supervision on providers of services related to digital assets is divided between the National Bank of Serbia (for services related to virtual currencies) and the Securities Commission (for services related to digital tokens).
By Jelena Stankovic Lukic, Partner, JPM Jankovic Popovic Mitic