Self-custodial wallet / non-custodial software in Kyrgyzstan

Law of the Kyrgyz Republic on Combating the Financing of Terrorism and Legalization (Laundering) of Criminal Proceeds (No. 87, dated July 25, 2011, with subsequent amendments). This law establishes the legal and organizational framework for AML/CFT, defines the obligations of reporting entities, and outlines the role of the financial intelligence unit.

The State Service for Financial Intelligence (SSFI) under the Ministry of Finance of the Kyrgyz Republic.

Adopted: Yes, Kyrgyzstan adopted legislation to regulate virtual assets and include VASPs within its AML/CFT framework.

Key Legislation: The primary law is the Law of the Kyrgyz Republic No. 200 "On the Turnover of Virtual Assets" dated August 10, 2022. This law provides the legal basis for the regulation of virtual assets and designates VASPs as obliged entities for AML/CFT purposes.

While Law No. 200 designates VASPs as obliged entities, the specific threshold amounts for the FATF Travel Rule (i.e., the requirement to transmit originator and beneficiary information) are typically set by the overarching AML/CFT law or secondary regulations/guidance from the Financial Intelligence Unit (FIU).

The Law No. 200 "On the Turnover of Virtual Assets" broadly defines and covers entities engaged in activities related to virtual assets. It defines a "Virtual Asset Service Provider" (VASP) as a legal entity carrying out one or more of the following activities for or on behalf of another natural or legal person:

Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.

Transfer of virtual assets.

Exchange between one or more forms of virtual assets.

This comprehensive definition aligns with FATF recommendations, ensuring that most relevant crypto businesses are covered.

Core Requirement: VASPs in Kyrgyzstan are required to obtain, hold, and transmit required originator (sender) and beneficiary (receiver) information for virtual asset transfers that meet the specified thresholds.

Identification and Verification:

For individuals: Full name, date and place of birth, citizenship, residential address, identification document details (e.g., passport, national ID number). Verification through reliable, independent sources (e.g., government-issued documents, utility bills).

For legal entities: Full name, legal form, registration number, legal address, tax identification number (TIN), details of beneficial owners, directors, and authorized signatories. Verification through company registration documents, articles of association, and public registries.

Beneficial Ownership Identification: VASPs must identify and take reasonable measures to verify the identity of the beneficial owner(s) of the customer, including those who ultimately own or control the customer, or the person on whose behalf a transaction is being conducted. Thresholds (e.g., 25% ownership or control) typically apply.

Purpose and Intended Nature of Business Relationship: Understanding the purpose and intended nature of the business relationship (e.g., why the customer is using virtual assets, expected transaction volumes and types).

Ongoing Monitoring: Continuously monitoring the business relationship and transactions to ensure that they are consistent with the VASP's knowledge of the customer, their business, and risk profile, including, where necessary, the source of funds.

Risk-Based Approach: VASPs must adopt a risk-based approach to CDD. This means applying enhanced due diligence (EDD) for higher-risk customers (e.g., Politically Exposed Persons (PEPs), customers from high-risk jurisdictions, complex structures, large transactions) and simplified due diligence (SDD) for lower-risk scenarios where permitted.

Obligation to Report: If a VASP has grounds to suspect that funds or other property, regardless of the amount, are related to the financing of terrorism or legalization (laundering) of criminal proceeds, it must immediately report such suspicions.

No Tipping-Off: VASPs and their employees are prohibited from disclosing to the customer or third parties that a suspicious transaction report (STR) has been filed, or that an investigation into money laundering or terrorist financing is being conducted.

Customer Identification Data: Records of all documents obtained during CDD, including identification and verification information, beneficial ownership details, and account details.

Transaction Records: Records of all transactions conducted, including amounts, types of virtual assets, dates, sender and recipient information, and any associated messages or instructions.

Analysis of Complex/Unusual Transactions: Records of any internal findings, analysis, or documentation related to complex, unusual, large, or high-risk transactions.

Retention Period: Records must generally be kept for a minimum period of five years from the date of the transaction or the termination of the business relationship.

National Bank of the Kyrgyz Republic (NBKR): While the SSFI is the primary AML/CFT supervisor, the NBKR also plays a crucial role in maintaining financial stability and overseeing the financial sector. The NBKR has historically issued warnings regarding the risks of cryptocurrencies. Any future comprehensive regulatory framework for VASPs might involve the NBKR, especially if virtual assets are classified as financial instruments or securities.

Regulator Name: National Bank of the Kyrgyz Republic (NBKR)

FATF Standard Threshold: The FATF Travel Rule generally applies to virtual asset transfers (transactions) exceeding USD/EUR 1,000 (or its equivalent in virtual assets) for cross-border transfers and USD/EUR 1,000 (or its equivalent) if the transaction is domestic and not part of a pre-existing business relationship where the customer has been verified. For unhosted wallets, the guidance usually suggests due diligence for transactions above a certain threshold (e.g., USD/EUR 1,000), but the Travel Rule itself focuses on VASP-to-VASP transfers.

Information Required (FATF Standard):

Non-compliance with AML/CFT obligations, including those related to the Travel Rule, generally falls under the existing national legislation on combating the legalization (laundering) of criminal proceeds and the financing of terrorism.

Administrative Fines: Significant monetary penalties for legal entities and responsible officials.

Suspension or Revocation of Licenses: The licensing authority (which is expected to be the State Service for Regulation and Supervision of the Financial Market under the Government of the Kyrgyz Republic or a similar body) can suspend or revoke a VASP's operating license.

Evolving Landscape: The regulatory landscape for virtual assets is constantly evolving globally and in Kyrgyzstan. VASPs should monitor for any new specific laws, regulations, or guidance related to cryptocurrencies issued by the SSFI or the National Bank of the Kyrgyz Republic.

FATF Standards: Adherence to FATF recommendations is paramount. VASPs should ensure their compliance programs are aligned with the latest FATF guidance on virtual assets.