Global: EU Reaches Provisional Agreement for Stricter AML Regulations in Cryptocurrency Sector

In a recent development, the European Council and Parliament have tentatively agreed to extend the coverage of the European Union’s Anti-Money Laundering (AML) and Counter-Terrorist Financing laws to encompass the cryptocurrency market. This decision, which follows the recent extension of AML guidelines for crypto firms by the EU banking watchdog, signifies a significant step toward enhancing regulatory oversight in the cryptocurrency sector.

Under the provisional agreement, the majority of the cryptocurrency industry will fall within the purview of these extended AML regulations. Companies offering cryptocurrency services are now mandated to conduct thorough customer verification processes, confirming customer details, and promptly reporting any suspicious activities. Notably, the new agreement stipulates that these companies must scrutinize all transactions with a value of €1,000 ($1,090) or more. The temporary law also introduces measures to mitigate risks associated with self-hosted wallets.

Lawmakers have introduced specific checks for crypto asset service providers involved in cross-border transactions, requiring vigilant monitoring of business connections, particularly those associated with high-net-worth individuals.

In addition, the provisional agreement empowers Financial Intelligence Units with enhanced authority to swiftly access crucial financial and administrative details. This includes information related to taxes, funds, frozen assets linked to financial penalties, and cryptocurrency transfers.

The newly proposed AML law is part of the broader legislative package called the Markets in Crypto-Assets Regulation (MiCA), introduced on July 20, 2021. MiCA aims to govern crypto markets across all EU member states, reinforcing the EU’s efforts against money laundering and terrorist financing. However, for this provisional law to become effective, formal adoption by the European Parliament and each member state is required.

In alignment with this regulatory push, the European Banking Authority, responsible for overseeing banks in the EU, recently amended rules to extend anti-money laundering provisions to include crypto companies. This means that crypto firms within the EU are now obligated to assess their susceptibility to financial crimes by thoroughly scrutinizing customers, evaluating offered products, examining delivery mechanisms, and considering geographical locations. The move underscores the EU’s commitment to tightening controls in the rapidly evolving cryptocurrency landscape.