EU Agrees to Toughen AML Rules for Crypto Sector

The European Council and Parliament have reached a provisional agreement broadening the reach of the European Union’s Anti-Money Laundering (AML) and Counter-Terrorist Financing law during landmark cases to combat fears relating to money laundering and counter-terrorism financing within the flourishing virtual currency market.

This move closely follows the EU banking watchdog, which recently extended AML guidelines to crypto firms. Now, under the conditions of the provisional agreement, most of the cryptocurrency industry will operate under AML regulations.

The deal will encompass the majority of the cryptocurrency industry. This implies that companies offering cryptocurrency services must verify customer details and promptly report any perceived suspicious activities.

Enhanced Scrutiny on Crypto Transactions

A key provision of the agreement is that companies must ensure transactions do not exceed €1,000 ($1,090). In addition, the temporary law has expressly incorporated systematic provisions for lowering risk related to self-hosted wallets.

The regulation framework outlines extra vigilance for crypto asset service providers handling cross-border transactions and requires improved monitoring of relationships that transmit millions worldwide. This is a good move in stopping any money laundering activities that cryptocurrencies could promote.

To enhance the effectiveness of the AML measures, a provisional agreement has expanded powers for the Financial Intelligence Unit (FIU). The provisions allow the agency to quickly access key financial and admin information, including tax details, frozen assets linked to financial penalties, and details of cryptocurrency transfers.

A recently proposed law as the AML is part of a wider legislative package, presented as Markets in Crypto-Assets (MiCA), first put forward on July 20, 2021. MiCA However, the provisional law can only take effect after formal adoption by the European Parliament and member states.

This move by the European Union mirrors a larger trend in intensifying financial sector regulations, specifically on cryptocurrencies. On January 16, the European Banking Authority (EBA) amended its rules. The amendment extends anti-money laundering (AML) requirements to crypto companies and falls under the EBA’s supervision of banks in the EU.

Cryptocurrency companies operating in the EU must assess their susceptibility to financial crimes. This involves scrutinizing their customers, the nature of their goods and services, and their operational locations. Consequently, they must now focus on mitigating the risks associated with illicit financial activities.

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