The European Union (EU) will have new AML regulations, taking effect next year, to tighten its oversight against money laundering and terrorist financing in the crypto space.
The new AML framework includes the start of another regulatory authority, the Anti-Money Laundering Authority (AMLA), which is set to foster collaboration among key authorities and reduce risks in the EU’s financial system.
The EU has been working on AML/CFT regulations since 2018
In 2018, the European Union introduced some AML/CFT guides. However, back then, the regulations were only applicable to custodian wallet providers and crypto-to-fiat currency service providers. They were also confined to anti-money laundering and terrorist financing policies and overlooked checks on market entry controls or consumer protection requirements.
In 2021, the EU was compelled to revisit its AML/CFT framework following a series of high-profile crypto crimes. At that time, 1% of the region’s GDP was also tied to suspicious financial activity, and all money laundering cases involved cross-border elements.
Thus, in 2023, the authority proposed a single rulebook to regulate and oversee a broader range of crypto-asset issuance, trading, and services and extend regulations to other crypto-asset service providers (CASPs).
The framework will incorporate new laundering directives
By the end of 2025, the EU is expected to have implemented the full-on legislative AML/CFT policy package, including the single rulebook for the region. The new rulebook will broaden the range of firms subject to regulations, encompassing mortgage and consumer credit intermediaries, fund managers, crowdfunding platforms, and investment migration operators.
The package will also include the institution of a new regulatory authority, the Anti-Money Laundering Authority. AMLA will supervise all crypto businesses with cross-border entities, which is projected to lower financial risks within the EU.
The new framework also includes the “new” 6th Money Laundering Directive (New 6AMLD). The directive will require EU member states to conduct NRAs every four years and develop regulatory bodies to supervise their own self-regulatory authorities. Member states will also be required to have their own FIU joint-analysis frameworks.
Moreover, the new AML/CFT framework will integrate regulation on funds and asset transfers. The regulation will require wire and crypto-asset transfers to include specific details, such as Legal Entity Identifiers (LEIs). Crypto-asset service providers (CASPs) must also collect, maintain, and share originator and beneficiary information with law enforcement upon request. For non-crypto remitters and CASPs, LEIs must be included whenever available.
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