Prevention of Money Laundering (AML) and professional services with crypto-assets

There are currently two main mechanisms built into European regulation to mitigate the risk posed by crypto-assets:

1. Extending the scope of AML/CFT regulations to new obliged parties
2. The strengthening of information exchange obligations between the parties operating in this field.

Extending the scope of AML/CFT regulations to new regulated entities

The new European AML/CFT regulatory package extends the scope of regulation to new obliged entities, including CASPs.

What are CASPs?

CASPs are service providers that enable customers to trade cryptoassets, such as exchanges, custody, trading, portfolio management, advice and issuance of cryptoassets.

The inclusion of CASPs in the scope of AML/CFT regulations is a major change for this sector, as it obliges them to comply with a number of obligations, such as:

• Identification of customers and verification of their identity
• Record keeping of operations
• The reporting of suspicious transactions

Strengthening information exchange obligations

The new EU AML/CFT package also strengthens the information exchange obligations between obliged entities. In particular, the so-called “Travel Rule” is introduced, which obliges CASPs to exchange information on crypto-asset transfers between their customers.

What is the point of the Travel Rule?

The Travel Rule aims to facilitate the detection of suspicious transactions and thus contribute to the prevention of money laundering and terrorist financing.

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The decision of adequacy in International Data Transfers (IDT)

International Data Transfers (TID) consist of the transmission of personal data to third countries.

Impact on professional services with crypto-assets

The new European AML/CFT package will have a significant impact on professional cryptoasset services. In particular, CASPs will have to implement a number of measures to comply with the new obligations, such as:

• Developing due diligence procedures to identify and verify customers
• Implement systems for recording transactions
• Establishing procedures for reporting suspicious transactions

These measures will increase costs and administrative burdens for CASPs. In addition, they could make access to cryptoasset services more difficult for customers, as CASPs may be more reluctant to accept new customers or to transact with customers who cannot comply with the new obligations.

Conclusions

The new European AML/CFT package is a major game changer for the cryptoasset industry. The inclusion of CASPs in the scope of AML/CFT regulation and the strengthening of information exchange obligations will have a significant impact on professional cryptoasset services.

CASPs will have to implement a number of measures to comply with the new obligations, which will increase costs and administrative burden. In addition, they could make it more difficult for customers to access cryptoasset services.

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