The Members of the European Parliament (the "MEP"s) from the Economic and Monetary Affairs and Civil Liberties, Justice, and Home Affairs committees have recently approved a more stringent legislative package aimed at addressing money laundering, terrorist financing, and evasion of sanctions across the European Union (the "EU"), which among others will particularly impact crypto-asset market participants.
The new Anti-Money Laundering and Counter-Terrorism Financing (the "AML/CFT") legislative package contains three pieces of draft legislation as follows:
- The EU "single rulebook" regulation;
- The 6th Anti-Money Laundering ("AML directive");
- The regulation establishing the European Anti-Money Laundering Authority ("AMLA").
Pursuant to the adopted texts, crypto-asset service providers ("CASP"s), as defined by long-awaited Markets in Crypto-Assets Regulation ("MiCA"), are proposed to fall within the scope of the new AML legislation as well as to be categorised as a type of in-scope financial institution and therefore, everything that applies to financial institutions, will apply to CASPs.
Furthermore, in comparison to MiCA, the new AML legislation covers Decentralized Finance ("DeFi") platforms as well as decentralized autonomous organizations ("DAO"), which will be obliged to comply if they provide crypto-asset services which are "controlled directly or indirectly, including through smart contracts or voting protocols, by identifiable natural and legal persons".
In addition, MEPs proposed to include Non-Fungible Tokens ("NFT"s) platforms within the scope of obliged entities and defined them as "persons providing services for the sale and purchase of unique and non-fungible crypto-assets".
As a result, the above-mentioned types of entities will be obliged to conduct customer due diligence checks, monitor transactions for suspicious activity and report any suspicious activity to the relevant authorities in the same way banks and other financial institutions presently do. Additionally, they will have to establish detailed types of risk of money laundering and terrorist financing and transmit the relevant information to a central register.
Another important implication introduced by the new AML/CFT legislative package is a proposal to set a limit of EUR 7,000 for cash payments and EUR 1,000 on anonymous crypto transactions i.e. transactions performed between self-custody wallets where the user cannot be identified.
Apart from the above, the MEPs also offer a ban on citizenship by investment schemes ("golden passports") and suggest imposing strong AML controls on residence by investment schemes ("golden visas").
The legislation still requires the European Council's approval before it becomes law. The negotiations on the final text of the new AML/CFT legislation are expected to start in April 2023 after a plenary session.
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