EU Agrees on New Crypto Rules to Combat Money Laundering

The European Union has reached a provisional agreement on new anti-money laundering (AML) measures that will affect the crypto sector. The agreement aims to enhance customer due diligence, transparency, and traceability of crypto asset transfers.

Crypto Asset Service Providers to Comply with AML Requirements

According to a press release published by the European Council, the provisional agreement extends the rules on information accompanying the transfers of funds to transfers of crypto assets. This means that all crypto asset service providers (CASPs) will need to apply customer due diligence measures when carrying out transactions amounting to €1000 or more. They will also have to collect and make accessible certain information about the originator and the beneficiary of the transfers of crypto assets they operate.

The agreement adds measures to mitigate risks in relation to transactions with self-hosted wallets, which are not associated with any CASP. These include enhanced due diligence requirements for cross-border correspondent relationships and high net-worth individuals. The agreement also requires that the full set of originator information travel with the crypto asset transfer, regardless of the amount of crypto assets being transacted.

The new AML measures are part of the EU’s new anti-money laundering system, which aims to improve the way national systems against money laundering and terrorist financing are organised and work together. The agreement is based on the recommendations of the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog.

EU to Establish a Dedicated Anti-Money Laundering Authority

The provisional agreement also paves the way for the establishment of a dedicated Anti-Money Laundering Authority (AMLA), which will have the authority to supervise certain CASPs and coordinate the cooperation between national authorities. The AMLA will also be responsible for developing a single integrated supervisory system and ensuring consistent application of the AML rules across the EU.

The AMLA will be operational by 2024 and will gradually take over direct supervision of some of the riskiest CASPs in the EU. The AMLA will also have the power to impose administrative sanctions and take remedial measures in case of breaches of the AML rules.

The co-legislators agreed that the general data protection regulation (GDPR) remains applicable to transfers of funds and crypto assets, and that no separate data protection rules will be set up. The improved traceability of transfers of crypto assets will also make it more difficult for persons and entities which are subject to restrictive measures to try to circumvent them.

Next Steps for the Agreement

The next steps for the agreement involve finalizing the agreed-upon texts, which will then be presented to representatives in the EU’s Committee of Permanent Representatives and the European Parliament for their approval. Following the approval, the Council and Parliament will need to formally adopt the measures. Once adopted, they will be published in the EU’s Official Journal and subsequently come into force.

The agreement is expected to strengthen the EU’s fight against financial crimes and enhance the security and integrity of the internal market. It will also provide the EU with a solid and proportional framework that complies with the most demanding international standards on the exchange of crypto assets.

“This agreement is part and parcel of the EU’s new anti-money laundering system,” said Belgian Minister of Finance Vincent Van Peteghem. “It will ensure that fraudsters, organised crime and terrorists will have no space left for legitimising their proceeds through the financial system.”