Yemen -- AML/CFT Compliance Regulatory Overview

It's crucial to understand that cryptocurrency transactions and virtual asset services are officially banned in Yemen. This significantly impacts any discussion of specific AML/KYC requirements for VASP operations within the country.

Therefore, there are no specific AML/KYC requirements for legally operating cryptocurrency/virtual asset service providers (VASPs) in Yemen because such services are prohibited. Engaging in virtual asset activities in Yemen carries significant legal and financial risks due to this ban.

However, we can outline the general AML/CFT framework in Yemen and how it would theoretically apply to any financial activity, including those deemed illegal like cryptocurrency trading.

Yemen's Stance on Virtual Assets:

In October 2021, the Central Bank of Yemen (CBY), based in Aden, issued a circular banning all cryptocurrency transactions and warning individuals and entities against dealing in them, citing their association with "fraud, deception, and money laundering." The CBY emphasized that cryptocurrencies are not legal tender and dealing with them is illegal.

Due to the ongoing conflict, Yemen has a fragmented government, with the Central Bank operating from two separate locations (Aden and Sana'a). While the Aden-based CBY issued the ban, the general sentiment across both factions is one of restriction or prohibition regarding cryptocurrencies, primarily due to concerns over financial stability, monetary policy control, and illicit finance.

General AML/CFT Framework in Yemen (Applicable to Illicit Activities)

While there are no specific VASP regulations, the existing anti-money laundering and combating the financing of terrorism (AML/CFT) legislation would apply to any detected illicit financial activity, including those involving virtual assets.

1. AML/CFT Legislation:

• Law No. 1 of 2010 on Combating Money Laundering and Terrorism Financing: This is the primary AML/CFT law in Yemen. It establishes the legal framework for identifying, freezing, and confiscating illicit funds, and mandates reporting obligations for financial institutions.
• Central Bank of Yemen Regulations: The CBY issues various regulations and instructions to financial institutions (banks, money exchangers, insurance companies) regarding the implementation of the AML/CFT law. These would cover traditional financial services.

2. Customer Due Diligence (CDD) Requirements (General Application):

If virtual assets were legal, or if authorities were investigating illegal virtual asset activities, the general CDD principles derived from Law No. 1 of 2010 would be expected:

• Identification and Verification: Obtaining and verifying the identity of customers (individuals and legal entities) using reliable, independent source documents, data, or information. This includes name, address, date of birth/incorporation, nationality, identification numbers.
• Beneficial Ownership: Identifying and verifying the beneficial owner(s) of legal entities.
• Purpose and Nature of Business Relationship: Understanding the purpose and intended nature of the business relationship or occasional transaction.
• Ongoing Monitoring: Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the obliged entity's knowledge of the customer, their business, and risk profile.
• Enhanced Due Diligence (EDD): For higher-risk customers, politically exposed persons (PEPs), or complex transactions, more rigorous checks would be required. Given the illegal status of crypto, any involvement would inherently be high-risk.

3. Suspicious Transaction Reporting (STR):

• Obligation to Report: Financial institutions and designated non-financial businesses and professions (DNFBPs) are legally obliged to report any suspicious transactions or activities to the Financial Information Unit (FIU).
• Definition of Suspicious Transaction: Any transaction that gives rise to a suspicion of money laundering or terrorism financing, regardless of the amount.
• Virtual Assets: Given the outright ban, any transaction involving virtual assets would inherently be considered suspicious and a potential predicate offense under the AML/CFT law.

4. Record-Keeping Obligations:

• Duration: Financial institutions are required to maintain records of customer identification data, account files, business correspondence, and transaction data for a period of at least five (5) years after the business relationship has ended or the transaction has been completed.
• Accessibility: Records must be maintained in a way that allows for rapid retrieval by competent authorities upon request.

5. Overseeing Authority:

• Central Bank of Yemen (CBY): The CBY is the primary financial sector regulator and supervisor responsible for overseeing AML/CFT compliance of banks and other financial institutions. Due to the ongoing conflict, there are effectively two CBYs:
  • Central Bank of Yemen (Aden-based): This is the internationally recognized CBY and the one that issued the crypto ban.
    • URL: While an official, consistently updated and accessible website for the Aden-based CBY is often challenging to find due to the conflict, its general purview is financial regulation. You might find references via international bodies or news agencies. A common reference point is sometimes found via organizations working in Yemen: http://www.cby.gov.ye/ (Note: this URL may not always be operational or up-to-date given the situation).
  • Central Bank of Yemen (Sana'a-based): Operating in Houthi-controlled territory, it also issues financial directives.
• Financial Information Unit (FIU): This unit is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) to law enforcement agencies. The FIU in Yemen operates under the umbrella of the government's financial oversight mechanisms.

Summary for VASPs in Yemen:

Given the explicit ban on cryptocurrency transactions by the Central Bank of Yemen, there are no legal Virtual Asset Service Providers (VASPs) in the country, and consequently, no specific AML/KYC requirements for their operation. Any individual or entity engaged in virtual asset activities in Yemen would be doing so illegally and would be subject to penalties under the general AML/CFT Law No. 1 of 2010, as well as other potential charges related to illegal financial activity.

Entities or individuals considering virtual asset operations in or with Yemen are strongly advised against it due to the legal prohibition and the high-risk operational environment.