On Thursday, 24 April, the European Parliament adopted a package of laws to combat money laundering and terrorist financing.
This was reported on the website of the European Parliament.
The new bills provide access to information on beneficial owners and give more powers to financial intelligence units to analyse and detect money laundering and terrorist financing, as well as to suspend suspicious transactions.
The registers will include data for at least five years. The innovations provide for enhanced customer identity verification measures, after which so-called obliged persons (e.g. banks, asset and crypto-asset managers or real estate agents) must report suspicious activity to financial intelligence units and other competent authorities. This rule applies to transactions of €10,000 or more or the equivalent in local currency, regardless of whether the transaction is carried out as a single transaction or through linked transactions. In other words, the agreement includes a pan-European limit on large cash payments of €10,000 and measures to enforce targeted financial sanctions and prevent circumvention of sanctions.
The new rules include the introduction of "risk mitigation" measures. These include blockchain analytics, crypto asset data collection and other actions. Industry-related service providers are also required to comply with standard KYC/AML procedures. In addition, the EU imposes a complete ban on anonymous payments via custodial wallets or transactions using confidential coins. Cryptomixers and other services aimed at providing additional privacy will be outlawed.
From cash to cryptoassets, from real estate to luxury goods and football clubs, we are targeting all areas where there is a real risk of illegal activity," commented EU Financial Affairs Commissioner Mairid McGuinness.
The harmonised regulations, part of the AML/CFT package, are to be applied by banks and other obliged persons to protect the EU internal market from money laundering and terrorist financing. The new rules will be overseen by national authorities and co-ordinated by the new European anti-money laundering agency, the Anti Money Laundering Authority (AMLA).
The new rules will not affect hardware and software providers and non-custodial wallets that do not have access to or control over digital assets. These include products such as MetaMask and Trust Wallet. Once the AMLR has been approved by European parliamentarians, the document is due to be published in the official journal of the European Union. This is expected to happen in June 2024. The regulations will come into force three years after final approval - that is, not before 2027.
How could this affect Cyprus?
The creation of the new AMLA anti-money laundering authority will put additional pressure on national agencies (Cyprus being one of them). Some checks may start in the near future, so that by the time AMLA starts work, the first results will already be available.
Another important point is the creation of a single European AMLA rulebook, which will have to be applied by all EU members. By the way, previously each state had some freedom in interpreting and applying EU Directives. This should put all countries on the same footing and close some of the existing loopholes.
For Cyprus, these changes will not cause much upheaval. Although some parts of the legislation take time to be amended and approved, in general the laws on the prevention of money laundering and terrorist financing are extensive, well-defined and sometimes stricter than the proposed standards mentioned in the EU Directives.
Equally important is the coverage of the entire cryptocurrency business, the black horse of the financial market. Right now, Cyprus is witnessing an increase in the number of organisations involved in crypto-business. And while local regulators have published their statements on the approach to such businesses, the proposed amendments will harmonise the approach for all EU member states, putting all countries in the same position.