Crypto Under Scrutiny: EU Tightens Anti-Money Laundering Net

European Union lawmakers have taken a significant step towards clamping down on financial crime with the provisional approval of three pillars of a wide-ranging anti-money laundering (AML) package. The new regulations, designed to crack down on illicit activities across the bloc, will bring cryptocurrency service providers under stricter scrutiny and establish a dedicated EU-level AML authority.

This move signifies a major shift in how the EU tackles money laundering and terrorist financing. Previously, regulations varied considerably between member states, creating loopholes that criminals could exploit. The new package aims to harmonize these rules, fostering a more consistent and robust approach to combating financial wrongdoing.

A cornerstone of the package involves stricter oversight of cryptocurrency service providers (CASPs). Under the proposed legislation, CASPs will be required to conduct thorough due diligence on their customers, including verifying identities and monitoring transactions for suspicious activity. This aligns with similar measures being implemented by other major economies, reflecting a growing global recognition of the potential for cryptocurrencies to be misused for money laundering.

The new rules establish a €1,000 threshold for mandatory customer due diligence checks by CASPs. This means that for any crypto transaction exceeding this amount, the provider will be legally obligated to verify the customer’s identity and source of funds. This stipulation aims to deter criminals from using crypto as a convenient avenue to launder illicit gains.

Another crucial aspect of the package involves the creation of a new EU Anti-Money Laundering Authority (AMLA). This dedicated body will be tasked with overseeing the implementation and enforcement of AML rules across the bloc. The AMLA will have the power to conduct inspections, investigate suspicious activity, and impose sanctions on non-compliant member states or financial institutions. The establishment of this central authority strengthens the EU’s ability to harmonize AML efforts and foster greater cooperation between member states.

The provisional approval of these key measures marks a significant development in the EU’s fight against financial crime. While the complete legislative process is not yet finalized, this move signals the EU’s commitment to creating a more robust and unified anti-money laundering framework. The stricter regulations for crypto service providers and the establishment of a dedicated AML authority are expected to make it significantly more difficult for criminals to launder money through the EU’s financial system.

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This article first appeared on The WIRE and is brought to you by Hyphen Digital Network

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