National risk assessment – can payment institutions provide cryptocurrency exchange?

On July 17, 2019, the Ministry of Finance published the long-awaited first national risk assessment. The national risk assessment contains numerous references to the cryptocurrencies, including officially confirming the possibility of running cryptocurrencies exchanges by payment institutions.

What is the national risk assessment?

The national risk assessment is a unified document covering, among others:

1. description of phenomena related to money laundering and terrorist financing;
2. a description of the applicable regulations on money laundering and terrorist financing;
3. an indication of the level of the risk of money laundering and terrorist financing in Poland together with justification;
4. identification of issues related to the protection of personal data related to counteracting money laundering and financing of terrorism.

The national risk assessment is performed by the General Inspector of Financial Information (GIIF), which submits it to the Minister of Finance for approval. The national risk assessment should be updated at least once every 2 years. Importantly – from the point of view of obligated institutions, the national risk assessment is an important source of information on the identified AML / CFT risks, methods of their mitigation as well as interpretation of the AML / CFT provisions by the GIIF.

Can cryptocurrency exchanges work as a payment institution?

Yes they can. On the occasion of describing the differences between a small payment institution (MIP) and a national payment institution (KIP), the KNF has explicitly expressed its opinion on the possibility of conducting activities by MIP as a cryptocurrency exchange:

„MIP with some quota and territorial restrictions can carry out most of the services that have been reserved for KIP so far. In addition, MIP may conduct so-called hybrid activity. This means that such an entity may also provide non-financial services. Thus, the MIP license can be used, for example, as part of the operations of cryptocurrencies, which may generate higher risk. „

It should be stated here that since the hybrid MIP can run a cryptocurrency exchange, the same entitlements are held by the hybrid KIP.

Importantly, the GIIF, in its national risk assessment, maintains its current risk assessment related to cryptocurrency exchanges. According to GIIF, the risks associated with cryptocurrencies are high. Compared to the general risk of money laundering in Poland (value 1.95 on a scale up to 4.0 – average risk level), identified risks associated with the use of cryptocurrencies are much higher:

1. risk of using cryptocurrencies to transfer value from illegal sources: value 3.0 (high level of risk)
2. risk of using cryptocurrencies for transfer of property values ​​for terrorist purposes: Value 2.6 (average risk level)

What does the national risk assessment mean for obligated institutions?

In our opinion, obligated institutions should become familiar with the national risk assessment and, if necessary, update the internal AML policies and risk assessments. There is a high probability that in the near future GIIF will start monitoring on the market.

We encourage you to contact our Law Firm – in our daily work, we deal with, among others:

1. preparation and adjustment of internal AML / CFT policies,
2. adjusting the AML / CFT risk assessment to the applicable regulations,
3. representation before the GIIF and the PFSA,
4. acquiring the rights of MIP and KIP.