L&M Finance Group

Additional 2023 AML measures

On March 28, members of the European Parliament adopted three additional directives to the rules on anti-money laundering and countering the financing of terrorism (AML/CFT). The new measures of the European Union (EU) to combat money laundering and terrorist financing are reported, among which three drafts were approved:

The EU's "Single Body of Rules" Regulation, which contains provisions to promote greater openness and transparency in the banking system, conducting customer due diligence, transparency of beneficial ownership and the use of anonymous instruments such as digital assets, reducing the risk of financial dependence on third countries and open access to banking services for people without permanent residence, as well as a ban on "golden" passports and visas;

The 6th Anti-Money Laundering Directive, which focuses on provisions for supervision and financial intelligence units aimed at exchanging information on AML/CFT matters across the EU;

Regulation establishing the European Anti-Money Laundering Authority (AMLA), which will have supervisory and investigative powers to ensure compliance with AML/CFT requirements. The AMLA will monitor risks and threats within and outside the EU, and will supervise specific credit and financial institutions, categorizing them according to their level of risk. In addition, each EU member state will be required to establish a Financial Intelligence Unit to prevent, report and combat money laundering and terrorist financing, in cooperation with other international organizations such as: AMLA, Europol, Eurojust and the European Public Prosecutor's Office.

In recent years, a number of shortcomings and gaps in the control system have been identified, which have allowed for abuse and violations. In particular, certain EU member states have not effectively fulfilled their obligations to detect and prohibit money laundering transactions, and banks and other payment providers have not always conducted appropriate monitoring. In this regard, the EU has adopted new measures aimed at strengthening the fight against crime and terrorism.

One of the main innovations is the introduction of a single customer database. Such a single customer database must be maintained by all payment service providers, i.e. banks, payment companies and other financial institutions, asset and crypto asset managers, real estate and virtual real estate agents and professional football clubs, etc. For this purpose, providers and organizations will also have to identify detailed types of money laundering and terrorist financing risks in their field of activity and submit the relevant information to the central registry. This database will contain information on all customers, including legal entities and individuals, and will allow for more effective detection and prevention of financial crimes and terrorist activities. Information about customers should include such data as name, address, date of birth and other personal data that will allow tracking financial transactions conducted by customers. This will allow for more effective detection and prevention of financial crimes and terrorist activities.

In addition, payment service providers must ensure appropriate monitoring of their customers. This means that all financial institutions should conduct a thorough analysis of their customers' financial transactions and identify any suspicious transactions. If a payment service provider detects a suspicious transaction, it should report it to the competent authorities, who will then investigate it further.

Among the main measures, it is also proposed to limit payments that can be accepted by persons providing goods and services to EUR 1,000 for transactions with digital assets, to set a limit of EUR 7,000 for cash payments if such a payer cannot be identified, and to approve a new anti-money laundering authority, AMLA.

This is one of the steps that the EU is taking to improve the fight against crime and terrorism, as well as to ensure the stability and security of the financial system in the EU member states and, in general, to measure the current EU attitude towards the digital asset space, as the final vote on the regulation of crypto assets markets (MiCA), as well as the European Parliament's discussion of the AML/CFT package, should be adopted in April 2023.

The MiCA includes: new classifications for different types of digital assets; regulatory regimes tailored to different assets; proof-of-funds requirements for stablecoin issuers; and a requirement for any company seeking to issue digital assets/coins to publish a white paper containing information about their project, including possible risks.

If the MiCA Regulation passes the vote without any problems in April, it is likely to enter into force in early 2024.