EU Provisionally Agrees Tough Crypto Due Diligence Measures to Combat Money Laundering

Crypto firms have to do checks on transactions of 1,000 euro or more, and the framework adds measures to mitigate risks in transfers with self-hosted wallets.

AccessTimeIconJan 18, 2024 at 2:31 a.m. UTC
Updated Mar 8, 2024 at 8:08 p.m. UTC

Policymakers in the European Union on Wednesday reached a provisional deal on parts of a comprehensive regulatory package to combat money laundering that will force all crypto firms to run due diligence on their customers.

The Anti-Money Laundering Regulation (AMLR) is a broad-stroke effort to combat sanctions evasion and money laundering. It includes the creation of a single rulebook and sets up a supervisory authority that will also have purview over the crypto sector.

The European Parliament and Council (which gathers finance ministers from the bloc's 27 member states) have agreed to measures, including for crypto firms to apply "customer due diligence measures when carrying out transactions amounting to €1,000 ($1,090) or more."

The deal also adds measures to mitigate risks in relation to transactions with self-hosted wallets, Wednesday's announcement said.

The EU last year finalized specific AML checks on crypto fund-transfers alongside its landmark Markets in Crypto Assets (MiCA) regulation. In December, the European Parliament and Council agreed on setting up the AML supervisory authority. Wednesday's agreement specifically concerned the EU's sixth money-laundering directive and the rulebook as part of the AMLR.

The package may have got tougher as it went through the EU's complex legislative process in light of U.S. sanctions against crypto anonymizing tool Tornado Cash, as well as fears that crypto was being used to evade sanctions by Russia and even Hamas. A lawmaker leading the discussions on the package in Parliament last year assured the measures won't seek to outlaw privacy-enhancing crypto.

Industry body, the EU Crypto Initiative, urged lawmakers in May 2023 to remove planned restrictions on privacy-preservation tools or, failing that, to include a "clear delineation between prohibited anonymous high-risk accounts and high-risk anonymizing instruments."

"This agreement is part and parcel of the EU’s new anti-money laundering system. It will improve the way national systems against money laundering and terrorist financing are organized and work together. This will ensure that fraudsters, organized crime and terrorists will have no space left for legitimizing their proceeds through the financial system," Belgian Minister of Finance, Vincent Van Peteghem, said in a press statement.

The deal now needs to be formally adopted by Parliament and Council before it can take effect.

Edited by Nikhilesh De.


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Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.