Financial Crime World

EU Unveils Ambitious Plan to Combat Money Laundering and Terrorist Financing

The European Commission has proposed a comprehensive overhaul of the EU’s anti-money laundering (AML) and counter-terrorism financing (CFT) rules, aimed at strengthening the bloc’s defenses against money laundering and terrorist financing.

Proposed Single Rulebook

The proposed single rulebook includes several key elements to improve the accuracy and efficiency of available data, as well as prevent attempts to hide a beneficial owner’s identity through nominee shareholders or directors. These include:

  • Register of Beneficial Ownership: All EU member states will be required to maintain a register of beneficial ownership, providing details on who ultimately controls companies and other entities.
  • Cross-Border System for Financial Intelligence Units (FIUs): A cross-border system enabling FIUs to access information from other EU member states, facilitating asset recovery in cross-border cases.

Cash Transactions Limit

The Commission is also proposing the introduction of a cap on cash transactions at €10,000. This move aims to prevent criminals from using cash transactions above this threshold to integrate illegal proceeds into the financial system, making them harder to trace.

Screening Third Countries

The proposed single rulebook includes an updated common framework for screening potential AML/CFT threats from third countries to the EU’s financial system. This includes:

  • Classifying Third Countries: Classifying third countries via autonomous EU or Financial Action Task Force (FATF) evaluations, with subsequent measures proportionate to the level of risks posed.

Cryptocurrencies in Focus

The Commission has set its sights on the crypto sector, proposing that EU AML/CFT rules apply fully to digital currencies. The proposed Markets in Crypto Assets (MiCA) Regulation will:

  • Introduce Increased Requirements: Introduce increased requirements for issuers of crypto-assets and crypto-asset service providers, including compulsory authorisation and a ban on anonymous accounts.
  • Enhance Monitoring Capabilities: Enhance monitoring capabilities and increase regulatory compliance obligations for crypto-asset service providers.

Digital Identity Solutions

The Commission is seeking to implement a robust framework enabling the safe use of digital identity solutions throughout the EU. This includes:

  • New Technical Standards: Introducing increased security requirements through new technical standards, designed to increase cross-border digital interaction between EU member states and provide improved security for businesses and citizens alike.

While the proposed package provides a basis for more robust and consistent EU rules to combat money laundering and terrorist financing, some have expressed concerns over its potential impact on the legal profession. The introduction of three levels of supervision for entities outside the financial sector may undermine the principle of self-regulation in the legal profession.

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