On 20 July 2021, the European Commission presented an ambitious package of legislative proposals to strengthen the EU’s rules on combating money laundering and financing of terrorism (AML/CFT). The package also includes a proposal for the creation of a new EU authority to fight AML/CFT, tasked also with overseeing the transactions with cryptocurrencies. The aim is to improve the detection of suspicious transactions and activities, and close loopholes used by criminals to launder illegal proceeds or finance terrorist activities through the financial system.
The idea of adopting new legislation and establishing a new AML authority dates back from 2018 when it was discovered that Danske Bank laundered money for several years over its small branch office in Estonia. It is assessed that the bank laundered approximately 200 billion EUR of money of suspicious or unknown origin.
In order to prevent such cases in the future and to protect the integrity of the financial system, the European Commission prepared a package which consists of four legislative proposals:
- A Regulation establishing a new EU AML/CFT Authority;
- A Regulation on AML/CFT, containing directly-applicable rules, including in the areas of Customer Due Diligence and Beneficial Ownership
- The sixth Directive on AML/CFT, replacing the existing Directive 2015/849/EU;
- A revision of the 2015 Regulation on Transfers of Funds to trace transfers of crypto-assets.
According to the legislative proposals, the new AML/CFT authority will be the central authority coordinating national authorities to ensure the private sector correctly applies EU rules.
The proposed reform will extend the AML rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. The reform will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited.
The legislative package will now be discussed by the European Parliament and Council. The future AML authority should be operational in 2024.
It will be interesting to see if the planned reform will cause changes in current Serbian AML legislation. Serbian current AML legislation already provides a broad spectrum of authorities and obligations for local entities, which are obliged to perform the KYC procedures in relation to their clients. Moreover, the Serbian banks are notoriously strict when it comes to KYC procedures, and require to be provided with a comprehensive number of documents and information in order to determine the beneficial owner (UBO) of the client and finally agree to open a bank account, which makes this procedure in some cases very exhausting and time-consuming.
It will be interesting to see how the proposed reform will affect the crypto-asset industry in general, and also if it would influence the Serbian banks to become even more demanding with their KYC requirements.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.