On Tuesday the European Union published its Fifth Anti-Money Laundering Directive (Directive (EU) 2018/843), aiming to both detect and investigate money laundering and prevent it from occurring.
The new directive, amending the prior Directive (EU) 2015/849, was passed by the European Parliament and the European Council and published in Official Journal L156 of the European Union.
Combating anonymity
The directive acknowledges that the inclusion of providers will not completely remove all anonymity with virtual currencies, and in large part, the environment will remain anonymous as it is not essential to make transactions with such providers.
However, to combat the risks related to anonymity, Financial Intelligence Units (FIUs) will be allowed access to information which will enable them to associate virtual currency addresses to the identity of the owner of the virtual currency.
The directive highlighted the ability of terrorists to fund their actions through virtual currencies. It identified that providers engaged in Exchange services between virtual currencies and fiat currencies as well as custodian wallet providers are under no obligation to identify suspicious activity.
Member state legislation will follow
According to the directive, “it is [sic] essential to extend the scope of Directive (EU) 2015/849 so as to include providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers [sic] For the purposes of anti-money laundering and countering the financing of terrorism (AML/CFT), competent authorities should be able, through obliged entities, to monitor the use of virtual currencies."
The directive went on saying: "Such monitoring would provide a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.”
It adds that the possibility of allowing users to self-declare to designated authorities on a voluntary basis should be further assessed.
EU Member states will need to amend their national laws, regulations, and administrative provisions to comply with the directive by January 2020.
