New EU measures against money laundering and terrorist financing

New EU measures against money laundering and terrorist financing

By: Y. Vasilis & Co LLC

Updates regarding MiCA, the Travel Rule and more

On 20.04.2023, the EU parliament endorsed the first EU rules to trace crypto-asset transfers, such as bitcoins and electronic money tokens and common rules on supervision and customer protection. In a press lease it was stated that green light to new rules for tracing transfers in the EU relating to crypto-assets were approved.

Travel Rule

The so-called “Travel Rule” is the common name for FATF recommendation #16 on combating money laundering. It requires to collect personal data on participants in transactions exceeding 1.000 Euro, including transactions from self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers. This means the names and account numbers of both senders/originator and recipients/beneficiaries must be gathered. The rule concerns cross-border and domestic wire transfers.

The Travel Rule also requires sharing sender and recipient data with each other during transactions. The personal data of the transacting parties’ “travels” along with their transfers. The information must be collected and submitted, immediately and by secure means, along with transfers of crypto-assets. The rules do not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.

While the transfer of personal data in traditional finance has been a long-established process, it is a totally new requirement for the crypto industry—one that entails building an unprecedented communication network between crypto platforms.

Uniform legal framework for crypto-assets markets in the EU (MiCA)

The MEPs also gave green light to new common rules in relation to MiCA. These rules relate to the supervision, consumer protection and environmental safeguard of crypto-assets, including crypto-currencies. MiCA will cover crypto-assets that are not regulated by existing financial services legislation. Key provisions for those issuing and trading crypto-assets (including asset-reference tokens and e-money tokens) cover transparency, disclosure, authorization and supervision of transactions. Consumers would be better informed about the risks, costs and charges linked to their operations. In addition, the new legal framework will support market integrity and financial stability by regulating public offers of crypto-assets.

Finally, the agreed text includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. To counter money-laundering risks the European Securities and Markets Authority (ESMA) should set up a public register for non-compliant crypto-assets service providers that operate in the European Union without authorization.

To reduce the high carbon footprint of crypto-currencies, significant service providers will have to disclose their energy consumption.

MiCA will enter into force at some point between mid-2024 and early 2025. More information about MiCA is available here.

Next steps

The texts will now have to be formally endorsed by Council before publication in the EU Official Journal. They will enter into force 20 days later.

Already on 28.03.2023 the MEPs from the Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees approved stricter rules to close existing gaps in combating money laundering, terrorist financing and evasion of sanctions in the EU as stated in a press release.

The press release mentions the adoption of the MEPs position on three pieces of draft legislations on the financing provisions of EU Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) policy. These three pieces cover

Provisions on conducting due diligence on customer, transparency of beneficial owner and the use of anonymous instruments, such as crypto-assets, and new entities, such as crowdfunding platforms (single rule book regulation – which refers to the aim of a unified regulatory framework of the EU financial sector),

AML measures to create an EU AML/CFT supervisor: the Anti-Money Laundering Authority (AMLA). This would assume responsibility for monitoring implementation of EU AML/CFT measures, which are now fully undertaken by member state regulatory authorities.

National provisions on supervision and Financial Intelligence Units, and access for competent authorities to necessary and reliable information, e.g. beneficial ownership registers and assets stored in free zones.

Next steps

The European Parliament will be ready to start negotiations on the AML/CFT package after a confirmation during a plenary session held in April.

How can Y. Vasiliou & Co LLC (YVL) assist?

You need to know whether your business will be impacted by these topics above or you need assistance in implementing the various requirements to ensure compliance with these topics?

YVL employs industry experts regarding AML Compliance and provides the regulatory know-how and support. Our service offering among other includes the setting up of a Cyprus Company and assisting with the application for a Cyprus Crypto-Asset Services Provider (CASP) License, consulting on and implementing the AML/CFT requirements and supporting with software solutions, technical implementation and the consultation therein. We do not only cover the basic services regarding AML Compliance but can also assist with on-going AML Compliance aspects, supported by skilled experts with hands on mentality.

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Tags: Blockchain, Crypto Industry


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