We're a small European prop shop dabbling in $BTC spot, mostly through exchanges. Starting to consider direct OTC for larger blocks, and I'm a bit hazy on the KYC/AML expectations if we're dealing with a non-EU entity. Is there a generally accepted framework for reciprocal due diligence, or does it primarily fall to the counterparty's jurisdiction to set the bar for their end?
Generally, it's the counterparty's jurisdictional requirements that dictate their side of the KYC/AML, but your own AML obligations don't disappear. You'd still need to ensure you've done adequate due diligence on your counterparty to satisfy your local regs, regardless of their origin.
For OTC with non-EU entities, it largely falls on their jurisdiction's rules for their end. However, your own AML obligations don't disappear, so you'll still need to perform appropriate due diligence on them from your side, potentially even if they've already been vetted by their local regulators. Reciprocal agreements are rare and often limited.
Usually, the counterparty's jurisdiction dictates their requirements. However, you'd still be expected to meet your own regulatory obligations under EU AML directives, which might involve due diligence on the non-EU entity even if their local laws are less stringent. It's rarely a 'reciprocal' situation where one side's compliance automatically satisfies the other's.