Virtual Currencies Caught In AML Regulatory Net

Cryptocurrencies face increasing regulation.

The European Union has approved new anti-money-laundering (AML) regulations aimed at the cryptocurrency sector.

The European Parliament has backed a move to more closely regulate cryptocurrencies. The text updates the EU’s AML legislation to address, among other issues, “the risks linked to virtual currencies.”

The new rules aim to reduce anonymity for both users and transactions, with requirements for know-your-customer procedures that crypto platforms will have to implement.

A European Central Bank official has called for segregating the crypto business from traditional finances. The updated directive will come into force after publication in the Official Journal of the European Union and member states will have a period of 18 months to implement it within their jurisdiction.

Once the legislation has entered into force, entities such as cryptocurrency exchanges will have to comply with certain guidelines to combat money laundering.

Crypto exchanges and wallet providers will be required to introduce customer due-diligence procedures, including identity verification. The platforms will have to register in order to offer their services.

The new measures come with the latest update of the EU’s AML Directive. Member of the European Parliament and co-rapporteur Krišjnis Karins observed: “Criminal behaviour hasn’t changed. Criminals use anonymity to launder their illicit proceeds or finance terrorism. This legislation helps address the threats to our citizens and the financial sector by allowing greater access to the information about the people behind firms and by tightening rules regulating virtual currencies and anonymous prepaid cards.”

Other measures include tougher criteria for assessing whether non-EU countries pose an increased risk of money laundering and closer scrutiny of transactions involving nationals from risky countries (including the possibility of sanctions); protection for whistleblowers who report money laundering (including the right to anonymity); an extension of the directive to cover all forms of tax-advisory services, letting agents and art dealers—as well as electronic-wallet providers and virtual currency exchange service providers.