According to a press release from the Council of the European Union (EU), dated June 29th 2022, negotiators from the Council presidency and the European Parliament have reached a provisional agreement on a proposal aiming to update the rules on information accompanying the transfers of funds – after three months of negotiations. This proposal is part of a package of legislative proposals to strengthen the EU’s anti-money laundering (AML) and countering terrorism financing (CFT) rules, presented by the EU Commission on July 20th 2021.
In short, the agreed to proposal foresees to expand the rules regarding the information accompanying transfers of fund (travel rule) to also apply to transfers of crypto based assets. In particular, it requires that certain information about the sender and the beneficiary will have to travel with the crypto based asset transfer, regardless of its amount. Crypto-assets service providers (CASPs) will be obliged to collect these information and make them accessible. The European Parliament states that these rules will also apply to transactions from un-hosted wallets, when they interact with hosted wallets managed by CASPs: In case a customer sends/receives more than Euros 1’000 to/from their un-hosted wallet, the CASP will have to verify whether the un-hosted wallet is effectively owned/controlled by this customer. The rules will however not cover person-to-person transfers conducted without a provider, for example through trading platforms. It was further agreed upon that the general data protection regulation (GDPR) is also applicable, and therefore no separate data protection rules will have to be set up.
This new regulation will allow better traceability of crypto based asset transfers and thus potentially enhance the identification of suspicious transactions. This in turn will enable the EU to deal with the risks of money laundering and terrorist financing linked to crypto based assets and to reach compliance with international standards, notably recommendations 15 and 16 of the Financial Action Task Force (FATF) Recommendations on combating money laundering and the financing of terrorism and proliferation. On the other hand, the agreement is seen to balance this risk mitigation with innovation and businesses interests and to take into account consumer and investor protection considerations, and the protection of the integrity of the financial market.
This reached provisional agreement needs to be confirmed by the EU Council and the EU Parliament before it can be formally adopted. The aim is to align the timetable for application of this regulation with that of the Regulation of Markets in Crypto-Assets (MiCa).
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