New EU AML rules come into force today causing ripples through the crypto community with some companies even shutting shop. The 5th Anti-Money Laundering Directive, which amends the 4th Anti-Money Laundering Directive was published in the Official Journal of the European Union on 19 June 2018. The Member States must transpose this Directive by 10 January 2020.
These amendments introduce substantial improvement to better equip the Union to prevent the financial system from being used for money laundering and for funding terrorist activities.
Some companies have closed down because the changed regulation is an apparent privacy concern. For instance, Bottle Pay closed down stating, “As we are a UK based custodial bitcoin wallet provider, we will have to comply with the 5AMLD EU regulation coming into effect on 10th January 2020. The amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community. Therefore to maintain our integrity as service providers, and to protect the interests of our team, investors and users, we have taken the painful decision to shut Bottle Pay down completely rather than become subject to these new regulations.”
These amendments will:
- Enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements;
- enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
- limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards;
- broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
- set up central bank account registries or retrieval systems in all Member States;
- improve the cooperation and enhance of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank.
What does the 5th Anti-Money Laundering directive bring?
Improving transparency on the real owners of companies The beneficial ownership registers for legal entities, such as companies, will be public. This wider access to part of the beneficial ownership information will enhance public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes.
Improving transparency on the real owners of trustsThe access to data on the beneficial owner of trusts will be accessible without any restrictions to competent authorities, Financial Intelligence Units, the professional sectors subject to Anti-Money laundering rules (banks, lawyers…) and will be accessible to other persons who can demonstrate a legitimate interest. In addition, when a trust is a beneficial owner of a company, access to this information can be requested via a written request.
Interconnection of the beneficial ownership registers at EU levelThe national registers on beneficial ownership information will be interconnected directly to facilitate cooperation and exchange of information between Member States. In addition, Member States will have to put in place verification mechanisms of the beneficial ownership information collected by the registers to help improve the accuracy of the information and the reliability of these registers.
Lifting the anonymity on electronic money products (prepaid cards) in particular when used online Member States will have the possibility to allow the anonymous use of electronic money products only in two situations: (i) when customers use their prepaid instrument (such as prepaid cards) directly in the shop for a maximum transaction amount of EUR 150; (ii) when customers carry out an online transaction with a prepaid card below EUR 50.
New EU AML rules come into force today with many closing shop rather than accept the new privacy rules.
