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  • K Kim and M Bacina

EU approves new AML/CTF rules for digital assets

The EU is continuing to progress new anti-money laundering and counter-terrorist financing (AML/CTF) for digital assets, with parliamentary committees approving positions on three pieces of AML/CTF related legislation last week.

The draft legislation contains strict requirements on cryptoasset service providers (CASPs) to identify the users of unhosted wallets. Under the proposals, where a CASPs customers’ transact with an unhosted wallet, the CASP would need to identify the counterparty behind the unhosted wallet for all transfers over a threshold of €1,000.

This is a step further to a similar provisional deal struck by the EU Partliament and EU council last July, which only requires CASP to verify whether the un-hosted wallet is effectively owned or controlled by the customer.

CASPs would be forbidden under the rules from processing transactions greater than €1,000 if they cannot identify a counterparty, or unless another regulated CASP is counterparty to the transfer.

The Rules also provides provisions on customer due diligence process, transparency of beneficial owners, the use of anonymous transaction mechanisms including crypto assets and crowdfunding platforms and a prohibition on ‘golden’ passports/visas which previously enabled individuals to gain passports/visa via investment programs.

The proposal introduces safeguards such as establishing a Financial Intelligence Unit (FIU) in each member state and having a Fundamental Rights Officer in every FIU to prevent, report and address ML/TF issues. It aims at increasing access to quality data by national authorities and regulatory bodies by mandating sharing of information between FIUs and encouraging cooperation with AMLA, Europol, Eurojust and the EU Public Prosecutor's office. The draft proposal ultimately looks to promote transparent, cross-border sharing of AML/CTF information across the EU.

Described as the 'heart' of the legislative package, the proposed Anti-Money Laundering Authority (AMLA) has been assigned supervisory and investigative powers to enforce compliance with AML/CTF measures. This new central authority is expected to ensure consistent enforcement of the new regulations and the MEPs have reflected their intention to further extend the AMLA's power to draw up lists of high-risk non-EU countries and mediate and settle disputes between national financial supervisors. The full extent of the power of AMLA will be determined during the negotiations between the Parliament and Council.

The EU Parliament is planning to commence negotiations on the full legislation following a confirmation during a plenary round scheduled in April.


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