EU Enforces Strict Crypto Rules to Fight Money Laundering

• EU Policymakers Reach Preliminary Agreement on Anti-Money Laundering Regulation
• The AMLR and Cryptocurrency
• Progress of Anti-Money Laundering Measures
• Increased Stringency of the Package
• Reaction of Industry Body
• Next Steps and Final Thoughts

EU Policymakers Reach Preliminary Agreement on Anti-Money Laundering Regulation

On Wednesday, policymakers in the European Union achieved a tentative agreement on sections of an extensive regulatory package aimed at fighting money laundering. The stipulations of this package require all cryptocurrency firms to conduct thorough due diligence on their clientele. Known as the Anti-Money Laundering Regulation (AMLR), this initiative is an all-encompassing approach to curb the evasion of sanctions and money laundering. It involves the establishment of a single set of guidelines and the creation of a supervisory authority with jurisdiction over the cryptocurrency sector.

The AMLR and Cryptocurrency

The European Parliament and Council, comprising finance ministers from the union's 27 participating countries, have concurred on measures. These include the requirement for crypto firms to apply customer due diligence measures when carrying out transactions that total €1,000 ($1,090) or more. Wednesday's announcement intimated that the deal also introduces steps to mitigate risks associated with transactions involving personal-hosted wallets.

Progress of Anti-Money Laundering Measures

In the previous year, the EU had finalized specific AML checks on cryptocurrency fund-transfers as part of its significant Markets in Crypto Assets (MiCA) regulation. In December, the European Parliament and Council achieved a consensus on the establishment of the AML supervisory authority. The agreement made on Wednesday specifically pertains to the EU's sixth money-laundering directive and the rulebook as an element of the AMLR.

Increased Stringency of the Package

The package's strictness may have been amplified during its passage through the EU's intricate legislative process. This increase may be in response to the U.S sanctions against the crypto anonymizing tool, Tornado Cash, and concerns that cryptocurrency was being leveraged to circumvent sanctions by Russia and Hamas. A legislator with a leading role in the package discussions in Parliament the previous year reassured that these measures will not aim to ban privacy-enhancing crypto.

Reaction of Industry Body

The EU Crypto Initiative, an industry body, appealed to lawmakers in May 2023 to eliminate planned restrictions on privacy-preservation tools. Alternatively, they suggested to include a clear delineation between prohibited anonymous high-risk accounts and high-risk anonymizing instruments.

Next Steps and Final Thoughts

This agreement is part and parcel of the EU's new anti-money laundering system. It will improve the way national systems against money laundering and terrorist financing are organized and work together. This will ensure that fraudsters, organized crime and terrorists will have no space left for legitimizing their proceeds through the financial system, said Vincent Van Peteghem, the Belgian Minister of Finance, in a press release.

The deal now awaits formal adoption by the Parliament and Council before it can be implemented.

Edited by Jonathan Stoker