Crypto Asset Service Providers Recognized as Obligated Entities Under the Regulation on Prevention Of Money Laundering And Terrorism Financing

The Regulation on Amending the Regulation on Measures for the Prevention of Laundering Proceeds of Crime and Financing of Terrorism ("Amendment Regulation") prepared by the Presidency was published in the Official Gazette dated May 1, 2021, and numbered 31471, entering into force on the same date.

With the Amendment Regulation, the scope of obliged parties under Article 4, Paragraph 1 of the Regulation on Measures for the Prevention of Laundering Proceeds of Crime and Financing of Terrorism (“Measures Regulation”) was expanded to include crypto asset service providers and savings finance companies. This measure aims to prevent the use of financial and non-financial institutions as well as certain business and professional groups by criminals for money laundering and terrorism financing.

A.            Developments

Through Article 1 of the Amendment Regulation, crypto asset service providers and savings finance companies were recognized as obliged parties under Paragraph 1 of Article 4 of the Measures Regulation.

Additionally, on May 4, 2021, the Financial Crimes Investigation Board (MASAK) published two new guidelines to provide direction to crypto asset service providers and savings finance companies regarding the implementation of the Amendment Regulation.

This brief information note focuses exclusively on the regulations applicable to crypto asset service providers and highlights their key obligations under the Amendment Regulation and the Guidelines for Crypto Asset Service Providers (“Guidelines”).

B.             Definition of “Crypto Asset Service Provider”

The term “crypto asset service provider” is not defined in the Amendment Regulation. However, the Guidelines provide a definition based on the definition of crypto assets in the Regulation on the Non-Use of Crypto Assets in Payments. According to the Guidelines, "crypto asset service providers" are institutions that mediate the buying and selling of crypto assets through electronic transaction platforms.

C.            Obligations of Crypto Asset Service Providers

As obliged parties under the Measures Regulation, crypto asset service providers are subject to several responsibilities, including:

a)             Customer Identification Obligation

Under Article 3 of the Law No. 5549 on Prevention of Laundering Proceeds of Crime (“Law No. 5549”), crypto asset service providers must identify individuals engaging in transactions with them or on whose behalf transactions are conducted before processing any transactions. They must also take necessary precautionary measures.

b)             Suspicious Transaction Reporting Obligation

In accordance with Article 4 of Law No. 5549, crypto asset service providers must report to MASAK any transactions suspected of involving property acquired through illegal means or intended for illegal purposes. Such reports must be submitted within ten business days from the date of suspicion or immediately in cases where delay poses a risk. The obligation to report rests with the legal representative of the entity.

c)              Continuous Information Reporting Obligation

Under Article 6 of Law No. 5549, crypto asset service providers must report transactions exceeding thresholds determined by the Ministry of Treasury and Finance to MASAK.

d)             Information and Document Submission Obligation

The Amendment Regulation obliges crypto asset service providers to provide MASAK and audit officials with any requested information, documents, and records in any format, ensuring complete and accurate access, including necessary passwords and other data.

e)              Retention and Submission Obligation

Under Article 7 of Law No. 5549, crypto asset service providers must retain documents related to obligations and transactions in any format for eight years. This includes documents from the date of issuance, records from the date of the last entry, and identification documents from the date of the last transaction. These documents must be presented to authorities upon request.

D.            Effective Date of the Amendment Regulation

The Amendment Regulation, published in the Official Gazette on May 1, 2021, entered into force on the same date.

For more information and support, please contact us at info@lbfpartners.com.

LBF Partners Law Firm