A Guide to Anti-Money Laundering for Crypto Firms
Following on our story from earlier this month, the EU’s European Commission released details about its new approach to anti-money laundering on July 20.
Amid a series of legislative proposals is the much-anticipated creation of a new anti-money laundering authority (AMLA) that will oversee AML/CFT efforts across the entire EU bloc. The AMLA’s approximately 250 staff members will directly supervise certain obliged entities — primarily cross-border or high-risk obliged entities — and position itself as “the centre of an integrated system of national AML/CFT supervisory authorities.”
In addition, the AMLA will offer support to the many EU Financial Intelligence Units (FIUs), streamlining information sharing channels and clarifying standards. To that end, the new agency will be the official host of FIU.net, the online platform designed to centralize information sharing among FIUs. This latter decision also provides a fitting resolution to an issue that first came to light in 2019; the EU had determined that having Europol continue to host FIU.net — as it has since 2016 — would run afoul of the EU’s General Data Protection Regulation (GDPR). FIU.net has been in search of a new home ever since.
The EU also confirmed its intention to create an EU-wide master rulebook — another widely anticipated move. The rulebook would contain an AML/CFT regulatory framework that supersedes national law. These rules would be more detailed than current EU-wide rules and would not need to be transposed into national law by each member state; instead, they would be directly imposed at the EU level.
Additional proposals include ensuring consistent rules across the bloc around customer due diligence and determining an entity’s ultimate beneficial owners, as well as expanding the list of obliged entities. Of specific note is the addition of all crypto-asset service providers, given the high level of scrutiny and growing public acceptance cryptocurrencies have enjoyed as of late. But crowdfunding service providers, mortgage credit intermediaries, consumer credit providers that are not already considered financial institutions, and operators that help third-country nationals obtain residence permits within the EU would also be added to the list.
Moreover, the EU would ban anonymous crypto wallets and require all transfers to be traceable. Yet, even with the increased focus on crypto as a way to move ill-gotten funds and avoid detection from authorities, the European Commission still recognizes that cash remains the preferred method to launder money and has proposed a ban on all cash payments over €10,000.
Finally, the European Commission intends to create its own “blacklist” and “grey list”. While expected to align with FATF’s recommendations, the creation of an EU-specific list will enable the EU to add countries not yet blacklisted or greylisted by the intergovernmental agency.
As we noted previously, the proposals aren’t guaranteed immediate passage. The European Parliament and the EU member states must weigh in. But while a few individual proposals may face hurdles, they’re unlikely to stall the main thrust of the legislation and the creation of the AMLA. Given that, financial institutions and other obliged entities would do well to start preparing for the EU’s regulatory overhaul now. The AMLA is expected to be up and running by 2024 and will assume supervisory responsibilities shortly after that.
Originally published July 29, 2021, updated May 6, 2022
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