Brussels, 31 March 2022
Crypto-assets’ transfers would need to be traced and identified to prevent their use in money laundering, terrorist financing, and other crimes.
- The legislation is part of the new EU anti-money laundering package
- Aim is to ensure crypto-assets can be traced in the same way as traditional money transfers
- There is an absence of rules for tracing transfers of crypto-assets like bitcoins and electronic money tokens
On Thursday, MEPs from the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) adopted, with 93 votes to 14 and 14 abstentions, their position on draft legislation strengthening EU rules against money laundering and terrorist financing.
Traceability of transfers of crypto-assets
Under the new requirements agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities. The rules would also cover transactions from so-called unhosted wallets (a crypto-asset wallet address that is in the custody of a private user). Technological solutions should ensure that these asset transfers can be individually identified.
The aim is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.
No minimum thresholds
Due to their speed and virtual nature, crypto-asset transactions easily circumvent existing rules based on transaction thresholds. MEPs decided therefore to remove minimum thresholds and exemptions for low-value transfers.
Public register of high-risk entities
MEPs want the European Banking Authority (EBA) to create a public register of businesses and services involved in crypto-assets that may have a high risk of money-laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant providers.
Before making the crypto-assets available to beneficiaries, providers would have to verify that the source of the asset is not subject to restrictive measures and that there are no risks of money laundering or terrorism financing.
Quotes
Ernest Urtasun (Greens/EFA, ES), co-rapporteur for ECON said: “Illicit flows in crypto-assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity. As illustrated by all the recent money-laundering scandals, from the Panama Papers to the Pandora Papers, criminals thrive where rules allowing for confidentiality allow for secrecy and anonymity. With this proposal for a regulation, the EU will close this loophole.”
Co-rapporteur for LIBE Assita Kanko (ECR, BE) said: “Our report has two goals: to protect and to normalise. We should be facilitating the use of crypto-assets by people of good will safely and correctly, as well as protecting against the use of crypto-assets for terrorist financing, extortion, child sexual abuse material or money laundering. But we also seek to normalise the crypto world as it grows, implementing rules that create trust. More than a decade after the creation of Bitcoin, it is high time we took these important steps for our citizens.”
Next steps
The adopted text represents the draft mandate for MEPs to negotiate the final shape of the legislation with EU governments. The EP as a whole should vote on it during the plenary session in April.
Background
The new rules are part of a new Anti-money laundering package, which sets out measures to strengthen the EU rules on combating money laundering and terrorist financing. It addresses the shortcomings of the existing framework, which include ineffective implementation, weak oversight and insufficient detection of suspicious transactions.
Currently there are no rules in the EU allowing crypto-asset transfers to be traced and providing information on the originator/beneficiary of such crypto-asset transfers.
Further information
Renew Europe embraces a step forward to end Russian oligarchs’ money laundering in Europe
March 31, 2022
The Renew Europe Group in the European Parliament welcomes today’s adoption of the revised transfer of funds regulation (EU 2015/847), which will reinforce anti-money laundering (AML) measures and put in place a stronger regulatory framework for crypto-assets. Reports suggest that anonymous crypto-asset transfers are being used by Russians linked to Putin’s regime to circumvent sanctions.
We negotiated firmly to ensure crypto-asset transfers (out of the EU scope so far) have the same requirements as for cross-border wire transfers, so as to ensure adequate oversight, and to clearly identify both providers and beneficiaries. Renew Europe supports the creation of a central AML supervisory authority with EU-wide jurisdiction, since the current supervisory system is highly fragmented and cooperation among competent national authorities is poor and ineffective.
Ondřej Kovařík (ANO, Czechia), Renew Europe’s shadow rapporteur on this file, declared:
“The key is to make sure that the EU’s anti-money laundering framework is adapted to the current challenges, especially closing potential legal loopholes and possibilities for misuse of crypto assets for illicit activities, such as money laundering or terrorism financing. We need an EU framework that is updated and in line with new technological advancements”.
Source – Renew Europe
ECR: Clamping down on criminality in crypto
March 31, 2022
Cryptocurrencies such as Bitcoin and Ethereum should no longer be an Eldorado for money laundering and terrorist financing, MEPs have voiced. “Regulating cryptocurrencies is just as important as the fight against terrorism. It’s clear that, especially now with Russia’s horrible war on Ukraine, we have to get this right. We need to make sure our law enforcement authorities are well equipped to fight the evasion of sanctions,” said Flemish ECR MEP Assita Kanko, who is co-rapporteur on a report on information accompanying transfers of funds and crypto-assets that has been adopted in the joint Committee on Economic and Monetary Affairs and Committee on Civil Liberties, Justice and Home Affairs today.
The report will improve the supervision of transactions in crypto assets. So far, crypto assets have not fallen within the scope of the usual regulations concerning banknotes and coins, book money and electronic money. Speaking after of the vote, Ms Kanko said: “trade in cryptocurrencies has boomed in recent years. Unfortunately, criminals and terrorists use the anonymity of crypto-currencies for fundraising and transfers. Al-Qaeda, Hezbollah and others, for example, are active on social media with campaigns calling on others to ‘Fund the Islamic Struggle without Leaving a Trace’. The new regulation will make these criminal activities much more difficult for them.”
Under the new regulation, information on the originators and beneficiaries of crypto asset transfers must be obtained, verified, retained and transmitted to the counterparty. Data protection also needs to be guaranteed throughout.
Kanko added:
“The European Union is making an important step towards a better supervision of crypto transactions. This supervision is perfectly normal in the financial world, for example in the case of transfers in euros or dollars. Now that crypto has become so big and so much money is involved, it is logical to organise supervision there too. In this way we protect citizens from criminal activities, we protect well-intentioned investors and traders in crypto currency, and we increase trust in the crypto sector with all its energy and innovative power.”
Negotiations with the European Council are expected to take place in April and May. The final text with the European rules for monitoring crypto transactions is expected to be finalised before summer.
Source – ECR (via e-mail)
Greens/EFA on EP Committee vote to improve anti-money laundering standards for crypto-asset transfers
MEPs from the Economic and Monetary Affairs, and Civil Liberties, Justice and Home Affairs Committees have just voted to extend and improve the current rules regarding the personally identifiable information of conventional transfers to crypto-assets. This regulation is part of the new Anti-Money laundering package, and aligned with the international standards set by the Financial Action Task Force (FATF). Unlike wire transfers there is currently no framework to ensure the traceability of transfers of crypto-assets, which poses money laundering risks. Inter-institutional negotiations are expected to start in the coming weeks and will likely conclude under the French Council Presidency.
Ernest Urtasun MEP, Greens/EFA Member and co-Rapporteur on the file in the Economic and Monetary Affairs Committee, comments:
“With this legislation we will close the loopholes that can allow criminals and the corrupt to abuse crypto-assets in order to launder money. Crypto transfers will be subject to the same rules as financial institutions, inline with international best practices.
“The war in Ukraine has laid bare the role of oligarchs and the flow of dirty money across Europe in supporting the regime of Vladimir Putin. It is essential we close down all avenues for money laundering. Crypto-asset service providers will have the obligation to obtain and hold on to beneficial information.
“Exchanges and other service providers will be obliged to identify and report suspicious transactions and freeze them if necessary. This legislation will mandate national authorities and the EBA to maintain a public register of high-risk providers. Providers of crypto-assets transfers shall refrain from executing or facilitating transfers with links to money laundering, terrorist financing and other illegal activities, including those based on the EU’s list of tax havens.
“It is essential that all financial institutions, including crypto-asset service providers, do their part in the fight against money laundering and financial secrecy, while ensuring that ordinary users can continue to benefit from these services safely with additional measures to support data protection.
“MEPs have voted to improve the data protection provisions in this regulation, adding the adequate safeguards for protecting confidentiality of personal data as a risk factor, and defining the limits of data retention. MEPs are working on the side of citizens and against oligarchs and corrupt individuals to ensure that the crypto space cannot be abused to support money laundering and criminality.”
Background:
Key elements of the adopted draft report include:
The text also includes specific enhanced due diligence obligations on counterparty crypto-asset providers and in relation to high-risk crypto transfers;
Clear prohibition to interact with entities providing crypto-asset services, which are not registered or have no substantial management presence in any jurisdiction, or with entities that operate in the EU without authorisation (non-compliant providers)
Introduction of an EBA public register (to be taken up by AMLA) to help compliance. This will include a list of
(a) non-compliant providers
(b) high-risk providers of crypto-asset services (such as those located in countries in the EU blacklist of AML/CFT or EU blacklist of tax havens),
(c) high risk crypto services, like privacy wallets, mixers and tumblers allowing for full anonymization without a legitimate reason, or
(d) crypto-asset wallets identified as high-risk and as having links with criminal activities; verification of ownership/identity of un-hosted wallets.