Čvn 26

EU Adopts New AML Directive to Combat Cryptocurrency Crimes

The European Union recently adopted a new anti-money laundering (AML) directive specifically targeting cryptocurrencies. It is the fifth AML directive of the EU, and aims to detect, investigate, and prevent financial crimes in the region.

Details of the Directive

The directive tagged “Directive (EU) 2015/849” allows Financial Intelligence Units (FIUs) to access cryptocurrency wallet information. These security agencies will be able to identify the owner of a cryptocurrency address, based on this latest policy. A portion of the directive reads:

It is therefore essential to extend the scope of Directive (EU) 2015/849 so as to include virtual currency exchange platforms and custodian wallet providers. Competent authorities should be able to monitor the use of virtual currencies. This would provide a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.

The major highlights of the new directive include:

  • A better understanding of the risks posed by virtual currencies as well as prepaid cards.
  • Improved cooperation between FIUs
  • More comprehensive checks on transactions originating from “high-risk third countries.”

One crucial aspect of the new policy is balancing its objectives of hindering criminal finance without disrupting the region’s payment ecosystem. Commenting on the new directive, Bulgarian finance minister and President of the European Council said:

These new rules respond to the need for increased security in Europe by further removing the means available to terrorists. They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms.

Cryptocurrency and ML/TF

A large part of the government opposition to cryptocurrency lies in the anonymity of the system. Many governments around the world are quick to declare that virtual currencies provide a viable conduit for money laundering and terrorist financing (ML/TF).

Recently, Robert Novy, Deputy Assistant Director of the U.S. Secret Service’s Office of Investigations called for “additional legislative actions” to address the dangers posed by privacy coins. Rep. Robert Pittenger of North Carolina even described virtual currencies as “one of the greatest emerging threats to U.S. national security.”

However, experts like Matt Peyer disagree, saying cryptocurrencies are for the most part overrated for terrorist finance. According to Peyer, while virtual currency transactions are somewhat anonymous, lack of places that accept them in known terror havens make them unsuitable for supporting terrorist activities.

In fact, a report from the Center for a New American Security (CNAS) revealed that only 7.929 BTC were linked to terrorist financing between 2015 and 2017.

What is your opinion on the new EU AML directive? Do you think cryptocurrencies are a viable means for terrorist financing and financial crimes? Keep the conversation going in the comment section below.

Image courtesy of Risetopeace.org, Shutterstock

Úno 03

European Commission to Bring Bitcoin Exchanges Under AML Directive to Curb Terrorist Financing

Source: bitcoin

money laundering, euro

Bitcoin exchanges in Europe are soon to be regulated under the scope of Europe’s Anti-Money Laundering Directive. The European Commission issued a statement late Tuesday night detailing new efforts to control financial flows and money transfers, which it described as aimed at subverting terrorist financing. Among these mechanisms are bitcoin and other virtual currencies. The Commission “proposes to bring virtual currency exchange platforms under the scope of the Anti-Money Laundering Directive, so that these platforms have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges.” The Commission’s renewed interest in financial controls comes on the heels of recent violence in Europe and beyond. Most European Bitcoin exchanges already perform extensive AML/KYC that has even alienated some of the more hardcore Bitcoin users.

Also read: G7 Leaders Looking to Regulate Digital Currencies

European Commission upping ante against alleged terrorist financing 2.0

The Commission’s First Vice-President, Frans Timmermans, described reducing terrorist funding as an effective ways to cut off terrorist efforts. Mr. Timmermans said:

“We have to cut off the resources that terrorists use to carry out their heinous crimes. By detecting and disrupting the financing of terrorist networks, we can reduce their ability to travel, to buy weapons and explosives, to plot attacks and to spread hate and fear online. In the coming months the Commission will update and develop rules and tools through well designed measures to tackle emerging threats and help national authorities to step up the fight against terrorist financing, and cooperate better, in full respect of fundamental rights. It’s crucial that we work together to deliver results and protect European Citizen’s security.”

Mr. Timmermans makes valid points about the need to stop terrorist financing immediately, regardless of its source. But is the Commission’s concern in bitcoin (“virtual currencies”) well-founded? According to Marco Santori, speaking at The North American Bitcoin Conference in Miami last month, a recent Financial Action Task Force (FATF) report ranked Bitcoin low on the list of primary financial instruments which break anti-money laundering laws.

Senate hearings in November 2013, and regulations like the NY BitLicense, demonstrate that American regulators are already aware of growing technological innovation in virtual currencies. FinCEN has enacted similar AML/KYC requirements of American Bitcoin exchanges. European regulators may have looked towards America for precedent and procedural advice in tackling a growing and complicated set of technical and legal challenges. Given recent advancements in Bitcoin mixing and anonymization, Bitcoin will need to be better understood by those in both countries’ political and legal communities to answer these difficult questions. Governments leaning on Bitcoin exchanges, the fiat gateways, is really all they can do.

What do you think about the European Commission’s move to curb Bitcoin use by terrorists? Comment below!

Featured image from taxrebate.org.uk.

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European Commission to Bring Bitcoin Exchanges Under AML Directive to Curb Terrorist Financing