AFM Report: Crypto Accounting for Accountants and Sanctions Compliance

The Dutch Authority for the Financial Markets (AFM) and the Bureau Financieel Toezicht (BFT) recently published a joint report on sanctions compliance by accounting firms. The report finds that while accountants are generally aware of sanctions risks, their control systems require significant improvement. For firms offering crypto accounting for accountants, this is a critical reminder that compliance frameworks must be robust. The AFM expects the sector to act on the identified weaknesses.

Key Findings from the AFM and BFT Report

The AFM and BFT examined accounting organizations with regular licenses. They found that awareness of sanctions risks is high, especially regarding clients with Russian connections. However, the actual implementation of controls lags behind. Client due diligence, quality systems, and risk management practices all need strengthening. The report highlights good practices but stresses that improvement is necessary across the board.

Why This Matters for Crypto Accounting for Accounting Firms

For accounting firms that handle crypto assets, sanctions compliance is especially complex. Crypto transactions can involve multiple jurisdictions and pseudonymous parties. The AFM report underscores that firms must go beyond basic checks. Crypto accounting for accounting firms requires specialized tools to screen wallets and transactions against sanctions lists. The report's findings apply directly to firms using crypto fund accounting software or serving funds with international exposure.

Lessons for Crypto Accountants and Auditors

Crypto accountants and auditors face unique challenges. The report suggests that many firms lack adequate procedures for ongoing monitoring. For a crypto accountant, this means integrating real-time screening into daily workflows. Crypto audit software can help automate checks, but the human element remains key. The AFM expects firms to document their processes and demonstrate compliance during inspections.

Improving Client Onboarding for Crypto Clients

One area for improvement is client onboarding. The report notes that initial due diligence is often insufficient. For crypto accounting for funds, this means verifying the source of funds and the beneficial ownership structure. Firms should use enhanced due diligence for clients from high-risk jurisdictions. The AFM recommends a risk-based approach, which aligns with best practices in crypto compliance.

Practical Steps for Accounting Firms

To address the AFM's concerns, accounting firms can take several steps. First, implement a robust sanctions screening tool that covers crypto addresses. Second, train staff on sanctions regulations and red flags. Third, conduct regular audits of compliance processes. For firms offering crypto accounting for accountants, these steps can differentiate them in the market. The report also suggests peer reviews and sharing of best practices.

Illustrative Scenario

To illustrate how this applies in practice, consider the following scenario: A Dutch accounting firm, Van der Meer & Partners, serves a fund that invests in decentralized finance protocols. The fund's investors include entities from multiple countries. During onboarding, the firm uses crypto fund accounting software to screen wallet addresses. A match with a sanctioned address triggers an alert. The firm escalates the case, files a suspicious activity report, and decides not to onboard the client. This proactive approach aligns with AFM expectations and protects the firm from regulatory risk.

Source: AFM Netherlands