The European Commission has updated the European Union’s anti-money laundering and countering terrorism financing (AML/CFT) rules. Included in the new policy is a requirement that anonymous crypto asset wallets will be prohibited. Along with the new policy on AML/CFT is the creation of a new EU AML Authority (AMLA).
The Commission states that the package is part of its commitment to protecting EU citizens and the EU’s financial system from money laundering and terrorist financing. The goal is to quickly detect illicit activity and to close loopholes used by criminals to launder proceeds or finance terrorist activities through the financial system.
Valdis Dombrovskis, Executive Vice-President for the Economy, said:
“Every fresh money laundering scandal is one scandal too many – and a wake-up call that our work to close the gaps in our financial system is not yet done. We have made huge strides in recent years and our EU AML rules are now among the toughest in the world. But they now need to be applied consistently and closely supervised to make sure they really bite. This is why we are today taking these bold steps to close the door on money laundering and stop criminals from lining their pockets with ill-gotten gains.”
Commissioner responsible for financial services, financial stability and Capital Markets Union, Mairead McGuinness, added:
“Money laundering poses aclear and present threat to citizens, democratic institutions, and the financial system. The scale of the problem cannot be underestimated and the loopholes that criminals can exploit need to be closed. Today’s package significantly ramps up our efforts to stop dirty money being washed through the financial system. We are increasing coordination and cooperation between authorities in member states, and creating a new EU AML authority. These measures will help us protect the integrity of the financial system and the single market.”
AMLA, the new EU Authority that is expected to transform AML/CFT supervision in the EU and enhance cooperation among Financial Intelligence Units (FIUs), will be the central authority coordinating national authorities to ensure the private sector correctly and consistently applies EU rules.
The AMLA will:
- Establish a single integrated system of AML/CFT supervision across the EU, based on common supervisory methods and convergence of high supervisory standards;
- Directly supervise some of the riskiest financial institutions that operate in a large number of Member States or require immediate action to address imminent risks;
- Monitor and coordinate national supervisors responsible for other financial entities, as well as coordinate supervisors of non-financial entities;
- Support cooperation among national Financial Intelligence Units and facilitate coordination and joint analyses between them, to better detect illicit financial flows of a cross-border nature.
Regarding crypto, currently, only certain categories of crypto-asset service providers (or virtual asset service providers) are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. The goal is to ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.
The future AML Authority is anticipated to be operational at some point in 2024.