A Guide to Anti-Money Laundering for Crypto Firms
In a new report, MONEYVAL, the Council of Europe’s financial crime research body, has called for stricter and more coordinated regulations to combat insufficient anti-money laundering (AML) compliance standards across 18 European jurisdictions. The report acknowledges that the growing use of digital currencies is becoming a significant challenge as traditional gatekeepers, such as lawyers and accountants, have little control over the sector. While European authorities have taken strides towards effectively monitoring this sector, MONEYVAL notes that the continent lacks a unified AML authority, creating a “vicious circle of erosion around policing dirty money”.
On evaluating the AML efforts of 22 jurisdictions, MONEYVAL found the median level of compliance to be below the satisfactory threshold outlined by the Financial Action Task Force (FATF). The only areas found to be above the satisfactory threshold were international cooperation, supervision, and private sector compliance.
In a section on “Compliance Trends”, MONEYVAL attributes unsatisfactory compliance efforts to a lack of risk understanding, which was demonstrated in the absence of in-depth assessments of certain specific risks, such as terrorist financing (TF) and offshore money laundering (ML). To address this, MONEYVAL recommends countries continuously strengthen their human resources capacities and engage further with the private sector in the risk assessment process to develop a more accurate understanding of ML/TF threats.
The “keepers” of dirty money
MONEYVAL’s Chair, Elżbieta Frankow-Jaśkiewicz highlights the role of specialized gatekeepers in helping launderers set up shell companies and other corporate structures. It notes that special attention has been given to the regulation of gatekeepers since 2020 due to the entities having been previously involved in money laundering scandals highlighted in the Panama Papers, the Paradise Papers, and the Bahamas leaks.
The report urges stringent measures to be put in place to counteract the continent’s “particularly weak” anti-money laundering (AML) defenses after MONEYVAL’s evaluation showed few governments adequately trace the owners of anonymous shell companies and none competently police the lawyers and accountants that serve them.
Cryptocurrency and money laundering
According to crypto analytics firm Chainalysis, crypto-based crime hit an all-time high in 2021, indicating that illicit entities received around $14 billion over the course of the year, a 79% increase from the year before. Commenting on this upsurge in criminal activity, MONEYVAL notes that supervisory cooperation in the field is not yet keeping pace with the rapid evolution of technology and that “innovative methods” should be implemented to enhance gatekeeper supervision.
Frankow-Jaśkiewicz also said that MONEYVAL will continue to strengthen its methods and priorities to help Council of Europe members tackle digital asset money laundering more effectively. MONEYVAL has partnered with many key agencies across Europe to strengthen its ability to clamp down on this money laundering typology, including the FATF.
Firms should review the takeaways outlined in this report to better understand the areas where policymakers and future mutual evaluation reports (MERs) are likely to focus. For jurisdictions awaiting a MONEYVAL country mutual evaluation – the 5th round of evaluations expected to be completed by 2024 – they should ensure the necessary policies are in place to evidence compliance and consider strengthening their AML/CFT processes in addition to providing further AML/CFT training to all staff.
Originally published May 13, 2022, updated May 20, 2022
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).