Introduction:
In a significant move towards bolstering the European Union’s fight against money laundering and terrorist financing, the Council and the Parliament have reached a provisional agreement on crucial aspects of the anti-money laundering package. This groundbreaking agreement is a pivotal step in protecting EU citizens and the integrity of the EU’s financial system.
Harmonizing Anti-Money Laundering Rules:
The agreement marks a milestone as it exhaustively harmonizes anti-money laundering rules throughout the EU. By transferring all rules applicable to the private sector into a new regulation and addressing the organization of institutional AML/CFT systems at the national level through a directive, the EU aims to leave no room for fraudsters, organized crime, and terrorists to legitimize their proceeds through the financial system.
Expanding the Scope of Obliged Entities:
The provisional agreement expands the list of obliged entities, crucial players in the AML/CTF framework, to cover various sectors. Notably, the crypto sector will see comprehensive coverage, compelling all crypto-asset service providers (CASPs) to conduct due diligence on transactions exceeding €1000. The agreement also includes traders of luxury goods, professional football clubs, and agents in the high-risk category.
The inclusion of measures mandating customer due diligence for transactions involving self-hosted wallets in the recent anti-money laundering agreement raises significant concerns within the cryptocurrency industry. Banning self-hosted crypto wallets and imposing Know Your Customer (KYC) requirements on all wallets, particularly for transactions exceeding €1000, presents a potential hurdle to innovation and financial privacy. Self-hosted wallets have long been heralded for providing users with a decentralized and private means of managing their digital assets. The requirement for KYC procedures not only contradicts the fundamental principles of decentralization but also poses a threat to the broader adoption of cryptocurrencies. This move may inadvertently stifle financial inclusivity, hindering the ability of individuals to freely manage their digital assets without the burden of invasive identification procedures. Striking a balance between regulatory oversight and preserving the essence of decentralized finance is crucial to foster a thriving and innovative crypto ecosystem that benefits users and regulators alike.
Enhanced Due Diligence Measures:
In response to the evolving landscape of financial transactions, specific enhanced due diligence measures have been introduced for cross-border correspondent relationships involving crypto-asset service providers. Credit and financial institutions are mandated to undertake enhanced due diligence when handling significant assets for high-net-worth individuals.
Cash Payments and Beneficial Ownership:
To curb money laundering, an EU-wide maximum limit of €10,000 for cash payments has been set, providing member states with flexibility to impose lower limits. The agreement also strengthens rules on beneficial ownership, requiring a harmonized and transparent approach. The threshold for beneficial ownership is set at 25%, and related rules on multi-layered ownership structures aim to enhance transparency.
High-Risk Third Countries and Directive Measures:
Obliged entities must apply enhanced due diligence measures for transactions involving high-risk third countries. The agreement aligns with international standards, such as those set by the Financial Action Task Force (FATF). The directive establishes beneficial ownership registers, allowing public access and inspections by relevant entities. Real estate registers are made accessible for investigations into criminal schemes.
Empowering Financial Intelligence Units (FIUs) and Supervisors:
The agreement outlines a robust framework for FIUs, ensuring immediate and direct access to critical information for combating money laundering and terrorist financing. Supervisors will apply a risk-based approach, and both EU and national risk assessments remain integral tools. FIUs will play a pivotal role in cross-border cooperation and information dissemination.
Conclusion:
This provisional agreement represents a groundbreaking step towards a more cohesive and effective anti-money laundering framework in the EU. With a focus on transparency, due diligence, and cooperation, the strengthened rules aim to safeguard the EU’s financial system and protect against the illicit activities of criminals and terrorists. The texts will now undergo finalization and approval processes, signalling a new era in the EU’s commitment to combating financial crimes.
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0420
https://www.consilium.europa.eu/en/press/press-releases/2024/01/18/anti-money-laundering-council-and-parliament-strike-deal-on-stricter-rules/