EU To Bring Stricter Anti-Money Laundering Rules for Crypto Firms

The European Union (EU) has strengthened its efforts to combat money laundering and illicit financial activities, particularly within the crypto sector. Following negotiations between EU states and the European Parliament, the agreement introduces stricter regulations for cryptoassets, luxury goods dealers, and high-value cash transactions.

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Overview of the Anti-Money Laundering Regulation (AMLR)

The Anti-Money Laundering Regulation (AMLR) represents a comprehensive effort to tackle sanctions evasion and money laundering across the 27 member states. Key aspects of the new framework include:

1. Single Rulebook and Supervisory Authority

The AMLR establishes a single rulebook and introduces a supervisory authority with oversight over the crypto sector. This move aims to streamline anti-money laundering efforts and enhance regulatory control.

2. Customer Due Diligence for Crypto Firms

Crypto firms are now obligated to apply "customer due diligence measures when carrying out transactions amounting to €1,000 ($1,090) or more." 

3. Mitigating Risks with Self-Hosted Wallets

The framework addresses risks associated with transactions involving self-hosted wallets, introducing measures to mitigate potential challenges in this space.

4. Special Checks for Cross-Border Transactions

Crypto asset service providers engaging in transactions across different countries will undergo special checks. This includes monitoring the business connections of wealthy individuals to prevent illicit activities.

5. Empowering Financial Intelligence Units

Financial Intelligence Units gain enhanced powers, allowing them quicker access to crucial financial and administrative details, such as tax information, frozen assets, and cryptocurrency transfers.

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Implementation and Legislative Process

The provisional AML law is part of the Markets in Crypto-Assets Regulation (MiCA) proposed on July 20, 2021, which will govern crypto markets across all EU member states. Formal adoption by the European Parliament and each member state is required for the law to come into force.

Given concerns about the potential impact on privacy-enhancing crypto tools, efforts have been made to strike a balance. The EU Crypto Initiative urged lawmakers to either remove restrictions on privacy-preservation tools or clearly distinguish between prohibited anonymous high-risk accounts and high-risk anonymizing instruments.

To enhance transparency, the rules require the registration of the ultimate or beneficial owner of all foreign entities owning real estate in the EU. This provision is applied retroactively to January 2014.