The European Commission proposed a new act today augmenting current Anti-Money Laundering regulations. The proposal is aimed at collecting additional information to contextualize and ground fund transfers from being misused for money laundering activities within its jurisdiction.
“EU AML/CFT rules will apply fully to cryptocurrencies: all Crypto Asset Service Providers will have to apply EU rules, to stop cryptocurrencies [from being used] to launder money.” the European Commission stated.
According to the published proposal, service providers who conduct transfers should be required by financial technology firms as well as crypto exchanges and crypto wallet platforms to have access to the name of a transfer’s originator, including their account number (based on each service provider’s system), where the account was made and exists, as well as precisely where it was used to process a transaction. A sender’s address, official personal document number, customer ID number, or even other personal information that could provide a ground for identification such as their date and place of birth are also required, according to the proposal.
Additionally, the proposal will also need strict procedures for the detection of missing information, perhaps with the use of automation and machine learning for wider data sets. The additional requirements are proposed to be implemented for transfers exceeding 1,000 euros or when transactions are identified as part of a series whose total exceeds 1,000 euros.
“[The proposal suggests that] in order not to impair the efficiency of payment systems and crypto-asset transfer services and in order to balance the risk of driving transactions underground as a result of overly strict identification requirements against the potential terrorist threat posed by small transfers of funds, ” the document stated.
For cases where a series of payments over 1,000 euros appear to be unrelated, the proposal provides payments firms with some leeway on the matter, except if the information under scrutiny directly affects “the pay-out of the funds in cash or in anonymous electronic money” or the service provider deems or suspects possible fraudulence or malicious intent behind the set of transactions.
The proposal also seeks to augment regulatory procedures on all financial transactions, including those made from and in relation to cryptocurrencies by proposing the prohibition of “cash” transactions over 10,000 euros. The commission also suggested the formation of a new financial regulatory authority, the Financial Action Task Force (FATF).
“Today’s amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.” the commission stated.
The new requirements were part of a series of four legislative proposals forwarded by the European Commission for review. The four proposals are aimed at improving the security and reliability of transactions, and providing contextual awareness as to whether certain transactions may be linked to money laundering or the financing of terrorist and/or criminal activities.
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