On Jun. 29, EU CNCL, EP reached agreement on applying AML rules.
Co-legislators reached a provisional agreement on updating the rules for transfers of funds, so that it will become more difficult to use crypto assets for criminal purposes.
Follows EC Jul. 2021 proposed package to overhaul AML/CFT legislation, see #111422.
Follows EU CNCL Apr. 2022 cover note attaching three column table, see #133746.
Provisional Agreement
The EU is making it more difficult to misuse crypto currencies for criminal purposes.
Negotiators from the Council presidency and EP have reached a provisional agreement on the proposal updating the rules on information accompanying the transfers of funds, by extending the scope of those rules to transfers of crypto assets.
Travel Rule
Extension of travel rule will ensure financial transparency on exchanges in crypto-assets, and will provide the EU with a solid and proportional framework that complies with the most demanding international standards on the exchange of crypto-assets.
In particular recommendations 15 and 16 of the FATF, the global ML/TF watchdog.
Crypto-assets service providers (CASPs) will have to provide this information to competent authorities if there is a money laundering / terrorist financing investigation.
This is what payment service providers currently do for wire transfers; and will ensure traceability of crypto-asset transfers to better identify possible suspicious transactions.
New agreement will enable the EU to deal with risks of money laundering and terrorist financing linked to new technologies, while reconciling competitiveness, consumer and investor protection, and the protection of the financial integrity of the internal market.
In particular, new agreement requires that full set of originator information travel with the crypto-asset transfer, regardless of the amount of crypto assets being transacted.
Un-Hosted Wallets
Rules would also cover transactions from un-hosted wallets, i.e. a crypto-asset wallet address of a private user, when interacting with hosted wallets managed by CASPs.
When customer sends/receives over €1000 to/from their own un-hosted wallet, CASP must verify if the un-hosted wallet is effectively owned/controlled by this customer.
The rules do not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.
Data Protection
Regarding data protection, the co-legislators agreed that the GDPR remains applicable to transfers of funds, and that no separate data protection rules will be set up.
Improved traceability of transfers of crypto assets will also make it more difficult for persons and entities subject to restrictive measures to try to circumvent them.
Internal Policies
In addition, crypto-asset service providers will have to implement internal policies, procedures/controls to mitigate risks of evasion of national/EU restrictive measures.
More generally, the entirety of sanctions already applies to all natural and legal persons, including those operating in the crypto currencies sector.
Obliged Entities
In due course, member states will have to ensure that all crypto asset service providers qualify as obliged entities under the 4th AML directive.
Will enable EU to align with FATF recommendations and level the playing field between member states that have developed so far different approaches in that regard.
MiCA Regulation
Co-legislators agreed on the urgency to ensure traceability of transfers and chose to align the timetable for application with that of markets in crypto assets (MiCA) rules.
Effectiveness
The Council agreed its position on the transfer of funds proposal on Dec. 1, 2021.
Trilogue negotiations started on Apr. 28 and ended in the provisional agreement reached on Jun. 29, which still needs to be confirmed by the Council and Parliament.
Next Steps
EP, EU CNCL and EU CMSN are working on the technical aspects of the text.
The agreement must then be approved by the economic and monetary affairs and civil liberties and justice committees and EP as a whole, before it can enter into force.
In Jun. 2022, EU CNCL confirmed agreement on crypto-asset regulation, see #142192.
The text, which was provisionally agreed upon, does not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.
The text will now have to be formally endorsed by EU CNCL before its publication in the EU official journal; entry into force will be 20 days after its official publication.
May 2023 EU CNCL Adoption
On May 16, 2023, EU CNCL announced final adoption of regulation on crypto transfers.
Under new rules, crypto asset service providers are obliged to collect, make accessible certain information on sender, beneficiary of crypto transfers regardless of amount.
Will ensure traceability and help better identify / block possible suspicious transactions.
The application date will align with date of application set for the MiCA regulation.
Jun. 2, 2023 Adopted Text
On Jun. 2, 2023, EU CNCL issued the adopted text of regulation, dated May 31, 2023.
Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union; it shall apply from date of application of the Regulation contained in document PE-CONS 54/22 (2020/0265(COD)), see #142192.
Jun. 9, 2023 Official Journal
On Jun. 9, 2023, EU CNCL issued TFR Reg 2023/1113 on crypto transfers in the OJ.
Regulation shall enter into force on 20th day following that of its publication in the Official Journal of the EU, Jun. 29, 2023; it shall apply from Dec. 30, 2024.
