EU Reaches Provisional Agreement to Combat Money Laundering Activities

The use of crypto in illicit activities has become the center of discussion among the global regulators. Despite the efforts to create a crypto-friendly environment in the European Union, the regulators expressed concerns about the rise of crypto crimes. This forced the EU regulators to take decisive action to address crypto-related crime. 

EU Enforcing Stringent Rules for Crypto Assets

In a recent publication, the EU Council and Parliament engaged in an embroiled discussion to regulate the crypto sector. In the meeting, the members of the EU Council reached a provisional agreement concerning the existing anti-money laundering (AML) rules. 

Based on the existing Western Sanctions and stringent rules on digital assets, the new provision might tougher than expected.

Under the new provision, the local crypto firms must complete the due diligence requirements to operate in the EU as a regulated entity. A review of the newly approved due diligence requirements demonstrated that the crypto-asset service providers (CASPs) in the region will be required to assess the compliance of customers’ transactions over €1,000 in crypto investments.

 Besides conducting the due diligence exercises, the new rules mandate the CASPs implement adequate security measures on transactions executed on self-hosted or noncustodial wallets. 

Scope of EU AML Rules

Under the existing EU law, the self-hosted wallets were considered high-risk and undermined the effectiveness of AML rules. The anonymity of the self-hosted wallets enabled the criminals to conceal their illicit activities. This forced the EU to develop effective measures to mitigate the risk associated with self-hosted wallets.

 Besides the measure for noncustodial wallets, the CASPs will be required to conduct due diligence on cross-border transactions. The proposed measures demonstrated the EU’s commitment to promoting safe and secure crypto transactions. 

With the changes in the crypto ecosystem, the EU noted that criminals took advantage of the unregulated financial system to launder substantial amounts of stolen funds. Based on the challenges facing the conventional financial sector, the regulators imposed the EU-wide maximum limit of €10,000 for cash transactions.

 In the latter, the official confessed that the maximum limits for cash payments aim to prevent criminals from laundering dirty money. The new rule mandates the CASPs to regularly conduct security checks on businesses engaging in cash transfers between €3,000 and €10,000. 

EU to Harmonize National Strategies for Addressing Money Laundering

In the report, the regulators confirmed that the new rules would apply to investors in the fashion, automotive, and engineering industries dealing with the large-scale production of metal, goldsmiths, luxury cars, yachts, jewelry, and airplanes. In addition, the EU Council forecasts that businesses will conduct security checks on professional football clubs in the future.

 Even though the proposed provision agreement has not reached the parliamentary approval stage, the council believes that the new rules will harmonize the regulatory approaches for combating money laundering in the EU.

A statement from the Belgian Minister of Finance, Vincent Van Peteghem, revealed that the new provisional agreement aligns with the objective of the newly launched EU AML system. The Minister stated that the new measures boost the existing national system to mitigate the money laundering and terrorist financing concerns. 

Need for Consumer Protection

Mr. Peteghem confirmed that with the new provision, notorious fraudsters, terrorists, and organized criminal groups will have no space to conduct illicit activities. Elsewhere, the renowned member of the EU parliament, Luděk Niedermayer, argued that the new rules will curb the “plethora of loopholes “used by criminals to launder funds.

Even though the representatives of the EU member states and the parliament have not approved the new provision, the regulator believes that it supports the existing financial laws.

In an earlier report, the EU approved the market for crypto assets (MiCA) regulation to provide regulatory clarity on digital assets. Before the MiCA rules took effect, the EU Council and parliament agreed to establish an AML regulatory agency that will develop a single rulebook to oversee crypto activities.

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