Financial Crime

Issue 1166 / 30 June 2022

Council of the European Union

AML Authority - Council of the European Union publishes partial position - 29 June 2022

The Council of the European Union has published a note stating it has adopted a partial position on the proposed Regulation establishing a new EU anti-money laundering authority, with the aim of harmonising and coordinating supervisory practices in EU member states (AML Authority). The Council’s position is partial as the location of the Authority’s seat has not yet been agreed.

The Council states that anti-money laundering and countering terrorist financing (AML/CTF) rely heavily on national implementation of EU measures and this has revealed weaknesses in the efficiency of the rules and the integration of international recommendations. Because of the cross-border nature of the relevant crimes, the Council believes it is necessary for measures to be implemented at an EU level to reduce divergences in national legislation and supervisory practices.

The Council’s partial position:

  • adds powers to the AML Authority to directly supervise certain types of credit and financial institutions, including cryptoasset service providers if considered risky;
  • entrusts the AML Authority to supervise up to 40 groups and entities, at least in the first selection process, and to ensure a complete coverage of the internal market under its supervision; and
  • gives more powers to the general board in the governance of the AMLA.

This follows the European Commission’s submission of a package of measures to the Council and the European Parliament on 20 July 2021 to strengthen the EU’s anti-money laundering and countering terrorist financing rules. The proposed Regulation will apply from 1 January 2024.

Note: Regulation establishing the AML Authority - Mandate for negotiations with the European Parliament (partial) (2021/0240(COD)) (10507/1/22 REV 1)

‘I’ Item Note: Regulation for the AML Authority - Mandate for negotiations with the European Parliament (partial) (2021/0240(COD)) (10506/1/22 REV 1)

Press release

European Parliament

AML/CTF - Crypto asset transfers - Council of the European Union and the European Parliament reach provisional agreement - 29 June 2022

The Council of the European Union (the Council) and the European Parliament have reached a provisional agreement on a proposal to introduce an obligation for crypto asset service providers to obtain and make available information about the originator and beneficiary of crypto asset transfers. The proposal will extend the scope of existing rules governing the information that must accompany a transfer of funds to include crypto assets. The agreement will enable the EU to address money laundering and terrorist financing risks associated with crypto trading.

The provisional agreement is part of a package of proposals presented by the European Commission on 20 July 2021 to strengthen the EU’s ability to mitigate money laundering and terrorist financing risks. The provisional agreement needs to be confirmed by the Council and the European Parliament before it is formally adopted.

Press release

EU AML package - Provisional agreement reached on new rules to stop illicit flows of cryptoassets - 29 June 2022

The European Parliament has announced that a provisional agreement with the Council of the EU (the Council) has been reached on a provisional deal on a new bill aimed at ensuring that cryptoasset transfers can always be traced and suspicious transactions blocked (the Bill). The Bill forms part of the Commission’s anti-money laundering package, published in July 2021, as previously reported in this Bulletin, and will be aligned with the proposed Regulation on Markets in Crypto-Assets (MiCA). The Council adopted its negotiating mandate on the Bill in April 2022.

Under the provisional agreement, the ‘travel rule’ is extended from traditional finance to cover transfers in cryptoassets. The travel rule requires that information on the source of the asset and its beneficiary travels with the transaction and is stored on both sides of the transfer. Cryptoasset service providers (CASPs) will be obliged to provide this information to national competent authorities if an investigation is conducted into money laundering and terrorist financing. As cryptoasset transactions easily circumvent existing thresholds that would trigger traceability requirements, the European Parliament stresses that the Bill contains no minimum thresholds or exemptions for low value-transfers as originally proposed.

The European Parliament explains that, before making the cryptoassets available to beneficiaries, providers will be required to verify that the source of the asset is not subject to restrictive measures or sanctions, and that there are no risks of money laundering or terrorism financing. A public register for non-compliant and non-supervised CASPs, with which EU CASPs will not be allowed to trade, will be set up under the proposed MiCA Regulation. The rules will also cover transactions from so-called ‘un-hosted wallets’ when they interact with hosted wallets managed by CASPs. If a customer sends or receives more than EUR 1000 to or from their own un-hosted wallet, the CASP will need to verify whether the un-hosted wallet is effectively owned or controlled by this customer. The rules do not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.

The European Parliament, Council and the European Commission are now working on the technical aspects of the text. The agreement must then be approved by the Economic and Monetary Affairs and Civil Liberties and Justice Committees and the European Parliament as a whole, before it can enter into force.

Press release

HM Treasury

AML/CFT - HM Treasury publishes policy paper on review of regulatory and supervisory regime - 24 June 2022

HM Treasury has published a policy paper on the review of the UK’s anti-money laundering (AML) and countering the financing of terrorism (CFT) regulatory and supervisory regime (the Review). The policy paper follows the Treasury’s Call for Evidence launched in July 2021. Alongside, HM Treasury has also published two post-implementation reviews of: (i) the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs); and (ii) the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision (OPBAS) Regulations 2017 (the OPBAS Regulations 2017).

HM Treasury explains that the Review focuses on improving the effectiveness of the MLRs, ensuring the application of effective risk-based controls across the regulated sector, and developing a world-class AML supervisory regime.

The Review sets out the Treasury’s intention to use the National Risk Assessment of Money Laundering and Terrorist Financing, and existing public-private for a, to assess emerging risks and potential changes to the scope of the MLRs. It has identified some areas where regulatory changes could improve the risk-based approach without weakening overall controls. However, there are areas, such as gatekeeping and suspicious activity reporting (SARs), where the case for further regulatory change at this stage is limited, and others where further work is needed before the full impact of proposed changes can be understood. The Treasury is also committed to working with supervisors and regulated firms on some of the common findings of the Call for Evidence including in relation to the difficulties faced by small or new firms, the supervisory approach to the risk-based approach and varying levels of risk understanding.

Given the potential impact of such reform, the Treasury is not proposing a single model at this stage. It will issue a formal consultation to better understand the implications and practicalities of each model and test its understanding of the benefits and risks before deciding on any option. It notes that any changes would take place over a period of years, particularly for major structural reform. In the interim, it will continue to work with supervisors to improve supervisory effectiveness and ensure that more short-term improvements are still achieved while longer term reform is considered. As a final point, the government is due to publish its second Economic Crime Plan later this year, which will contain many areas of interest from the Review.

HM Treasury Policy Paper: Review of the UK’s AML/CFT regulatory and supervisory regime

Post-implementation review: the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

Post-implementation review of the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations 2017

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