The Isle of Man shows considerable activity with respect to cryptocurrencies: everyone is interested in digital currencies and is discussing what benefits they can bring to the island. So, the government of the Isle of Man shows that it is entirely open to such a novelty and even offers the opportunity for residents to pay taxes using Bitcoins. The Commission on Financial Supervision of the Isle of Man reacted very quickly to the revitalization of the sphere and brought promptly the rules for preventing the laundering of funds obtained by criminal means in line with the development of the industry. Thus, the government shows its desire not to burden this developing sphere with regulation.
In 2015, the amendments were made to the legislation of the Isle of Man, according to which the Financial Services Commission (hereinafter referred to as the Commission) should monitor the compliance of laundering laws by the companies that operate in the field of cryptocurrencies.
On October 26, 2015, the amendments to the Companies Act, which carry out certain types of activities (registration and supervision issues) (The Designated Businesses (Registration and Oversight) Act 2015) came into effect.
These changes do not affect the regulation of the companies that already have licenses for certain types of activities. At the same time, the role of the Commission in licensing and supervising the activities of financial institutions is different and completely separate from its activities in accordance with this law.
Companies that carry out certain activities are registered and monitored by the Commission solely for the purpose of controlling money-laundering and funding of terrorism. Control is carried out by other bodies together with the Commission in their own fields, for example, the Union of Lawyers of the Isle of Man, the Institute of Chartered Accountants in England and Wales, the Association of Chartered Certified Accountants, the Office of Fair Trading of the UK, etc.
The companies that deal with the issue, sending, transfer, provision of services of responsible person and simply storage, administration, management, leasing, sale, exchange, other types of trade or intermediation related to convertible virtual currencies (including cryptocurrencies or similar models, if such models are accepted by the persons as a method of payment for services or goods, a unit of account, a means of accumulation or a valuable resource) are required to report to government agencies in case they have suspicions that the persons engaged in activities are involved in money-laundering. They should also assist in identifying suspects.
In this article, we will consider how the registration procedure of companies that carry out certain types of activities takes place, basic requirements and restrictions, terms of registration, etc.
First of all, when submitting documents for the registration, the Commission is obliged to register a person who submits the documents, and if the Commission decides that such a person is not suitable for certain criteria, the application may be refused.
So the Commission will refuse to register any person who:
- Was found guilty of a crime:
- under the laws on money-laundering and funding of terrorism of the Isle of Man;
- under the laws of the country or territory outside the Isle of Man that relate to money-laundering or funding of terrorism;
- associated with fraud (both under the laws of the Isle of Man and other countries);
- related to the provision of false information or obstruction of justice (both under the laws of the Isle of Man and other countries).
- Is or has been involved in any activities related to the investigation of law violation of the Isle of Man on companies and/or money-laundering and funding of terrorism;
- Submits deliberately untruthful or false information in the application;
- Is considered by the Commission for other reasons as a person belonging to an increased risk group for money-laundering and funding of terrorism.
All the information provided is considered in the complex, and, of course, the circumstances of each of the applicants will not be identical. The Commission considers all key circumstances and each application on its specific qualities.
Applicants file a completed application and all accompanying documents through the website of the Commission. To date, the deadline for consideration of the application and documents by the Commission is 3 months. However, such a period of consideration can only be guaranteed if all the necessary information and documents for the decision have been submitted with a application. The Commission also warns that, during periods of high workload, applications can be considered longer than 3 months.
As a general rule, in the event if the consideration process does not have results in 6 months, in connection with the failure to provide the requested documents by an applicant, the Commission may require the filing of a new application, with the appropriate payment of the cost for filing an application and re-submitting all requested documents.
It is important to note that the Commission accepts applications only from those companies that intend to conduct business from the moment of obtaining a license, and do not plan to carry out such activities for some indefinite period in the future. It is expected that the company that receives a license undertakes to start operating no later than 6 months from the date of registration by the Commission, unless otherwise agreed in writing.
In case of refusal to register, the Commission issues a written decision to the applicant describing the reasons for the refusal. In case of disagreement with the decision, an applicant can appeal to the Financial Services Tribunal.
Criteria the applicants should meet for obtaining a license to engage in certain types of activities
Before registering an applicant, the Commission will consider significant factors with respect to the activities of the company as a whole, as well as regarding certain individuals who are responsible for the management and control of the company (including owners).
Due to the importance of the position, the Commission will also verify the competence of the supervisor regarding money-laundering, the senior officer supervising money-laundering, as well as the internal control specialist.
A fit-and-proper test is a preliminary check (at registration) and an ongoing check (in the course of conducting certain activities). The Commission may take measures, including suspension or cancellation of registration, if the company’s activities stop meeting the requirements and certain criteria.
On determining fitness and properness, the Commission takes into account:
- decency of the company-applicant;
- reliability of controllers and directors of the company;
- impartiality and competence of the officer supervising money-laundering, the senior officer supervising money-laundering, as well as the internal control specialist;
- nature and scale of the activity planned by the applicant.
On considering the applications, the Commission determines them for compliance with the Companies Act, which carry out certain types of activities (registration and supervision issues) in 2015, and legislation on laundering obtained by criminal means.
At the same time, when considering a particular case, violation of the legislation of both Man and other countries is taken into account. If such cases are identified, this will be regarded as insufficient decency and reliability.
The structure and organization of the company which intends to obtain a license
As a general rule, the structure of the company should enable the Commission to determine:
- ultimate beneficial owners of the company;
- persons who control the appointment of management (directors and supervisors);
- guide (“specified persons”)
It should be taken into account that fulfilment of options in respect of shares (stakes) of the company may affect the ownership of a control stock of the company, therefore it is expected that the company-applicant will notify the Commission of any such options and their terms.
If the applicant company is a part of a group of companies, the Commission reserves the right to request information about other companies in the group, other management companies, and, if necessary, information about the entire group as a whole.
Persons responsible for management and control
As it was mentioned earlier, all persons of the company-applicant, which in one way or another are connected with the management or control of the last one, must meet the criteria of the Commission.
Persons who manage or control the activities of a company are required to file special questionnaires in order for the Commission to be able to determine whether they are suitable persons. In addition, the Commission, if necessary, can invite such persons to a personal interview to determine whether competence and experience allow them to lead/control the company.
In general, it can be noted that the laws of the Isle of Man describe in sufficient detail all the procedures that should be passed by the companies that intend to conduct activities related to cryptocurrencies. This regulation makes this jurisdiction attractive to the customers.
In addition, it is worth remembering that the Isle of Man has not been included in the black list, recently approved by the EU, and this makes it possible to use all the advantages of the companies for making profit.