In context: Due to its anonymous nature, cryptocurrency has long been associated with scams, money laundering and other financial crimes. Users can track crypto asset transfers, but the originator and beneficiary of the transfer always remain anonymous. To fight that, the European Commission plans to prohibit anonymous crypto transfers and wallets.
The European Commission (EC) proposals presented this week aim to protect EU citizens and the EU’s financial system by enforcing its anti-money laundering (AML) and countering terrorism financing (CFT) rules. With the proposal package, EC hopes to detect and disrupt criminal and terrorist financing activity.
EC’s package consists of four proposals: the creation of a new EU AML/CFT authority, implementation of new rules affecting areas of Customer Due Diligence and Beneficial Ownership, updating the existing Directive 2015/849/EU with new rules covering national supervisors and Financial Intelligence Units in member states, and a revision of the 2015 Regulation on Transfers of Funds to track crypto assets transfers.
Most of these proposals are directed to large companies, but some also affect the general public holding crypto assets. As per EC’s new proposal, service providers will be obliged to conduct due diligence on their customers. Moreover, it will ensure that all transfers are fully traceable, from source to destiny, preventing “possible use for money laundering or terrorism financing.”
If approved, crypto service providers handling asset transfers or a traditional wire transfer will ensure that it’s accompanied by the name of the originator, the originator’s account number, originator’s address, personal document number, customer ID or date and place of birth, name of the beneficiary, the beneficiary’s account number, and where the accounts exist.
On the other side, the beneficiary’s service provider will be responsible for implementing a system capable of detecting the legitimacy of the originator’s information and a monitoring system to detect if any information on the originator or the beneficiary is missing.
Before becoming law, the proposal has to be accepted by the European Parliament and EU’s member states. It’s unclear when the parties will vote on this matter, as the process can take up to two years.
Image credit: Ewan Kennedy