EU parliament approves stricter rules to combat money laundering and terrorist financing

Getting your Trinity Audio player ready...

The latest European Union parliament vote on its Anti-Money Laundering and Countering the Financing of Terrorism (AML/CTF) bill imposes a €1,000 ($1,088) cap on anonymous digital asset transactions and approves a new anti-money laundering authority.

On Tuesday, EU lawmakers approved positions on three new pieces of draft legislation as part of its AML/CFT package, including a new enforcement agency, a €1,000 ($1,088) cap on anonymous digital currency transactions, and a ban on citizenship by investment—the so-called “golden” passports and visas.

The three drafts approved were:

The EU “single rulebook” regulation, which contains provisions on conducting due diligence on customers, transparency of beneficial owners, and the use of anonymous instruments, such as digital assets, as well as a ban on “golden” passports and visas; this passed with 99 votes to 8 and 6 abstentions.

The 6th Anti-Money Laundering directive, which focuses on provisions for supervision and Financial Intelligence Units aimed at EU-wide information sharing around AML/CTF matters; the text was approved 107 votes to 5 and 0 abstentions.

Regulation establishing the European Anti-Money Laundering Authority (AMLA), which will have supervisory and investigative powers to ensure compliance with AML/CFT requirements; this was adopted 102 votes to 11 and 2 abstentions.

The AMLA is described as the “heart” of the legislative package, and it’s hoped it will “transform AML/CFT supervision in the EU” by providing a central authority to coordinate national authorities and improve analytical capacity around illicit money/asset flows.

A key feature of the “single rulebook” bill is its cap on anonymous digital asset payments at €1,000 ($1,088), and the draft also seeks to restrict cash transactions at €7,000 ($7,613) when it is not possible to identify the sender.

Eva Maria Poptcheva, co-rapporteur for the Anti-Money Laundering Authority and one of the MEPs that will lead the negotiations on the final shape of the bills, said of the new measures: “The EU’s hands-off approach towards dirty money has only yielded scandals. The time has come for a crackdown. AMLA is the game-changer we needed, and with it, the EU can end the economic nationalism that has fueled this laundromat.”

When they come into force, the new AML/CFT rules, and the AMLA that enforces them, will extend to the entire digital asset sector operating in Europe and oblige all crypto-asset service providers (CASPs) to conduct extensive due diligence on their customers.

The AML/CFT package was originally proposed in July 2021, and the EU agreed to its initial position in December 2022; the legislation then moved to trialogue negotiations with the European Parliament.

When the package was announced back in 2021, Mairead McGuinness, Commissioner responsible for financial services, financial stability, and Capital Markets Union, described money laundering as “a clear and present threat to citizens, democratic institutions, and the financial system,” and suggested that the bill “significantly ramps up our efforts to stop dirty money being washed through the financial system.”

After approving this latest set of positions on the AML/CFT package, the European Parliament will be ready to start negotiations on the full legislation after a confirmation during a plenary session in April.

A sign of the EU’s pre-MiCA crypto-sentiment

The draft AML/CFT bills also provide a helpful barometer to measure the current EU feeling towards the digital asset space, with the sweeping Markets in Crypto Assets (MiCA) regulation due for its final vote in April.

MiCA includes new classifications for different digital assets, regulatory regimes molded to different assets, proof-of-funds requirements for stablecoin issuers, and the requirement for any company seeking to issue digital assets/coins to publish a white paper containing information about the project, including possible risks.

The MiCA regulation has broad support and is expected to pass its vote comfortably, after which it will likely come into force in early 2024.

Watch: Law & Order Regulatory Compliance for Blockchain & Digital Assets