The European Union has finally set the stage to prevent the misuse of digital currency for terror financing and money laundering activities. It has introduced 5th anti-money laundering directive with effect from July 9, 2018. The EU States should include the new 5th directive into its own laws within eighteen months.
This directive comes into effect after 2 years of talking about stricter controls on digital payments and against the company owners. However, the new rules are likely to fail on the backdrop of new loopholes exposed due to banking scandals surfaced in Malta, Estonia, and Latvia this year.
What are the key changes promulgated in the 5th anti-money laundering directive?
- The scope of this directive is extended to include the providers of the exchange services between the flat currencies and virtual currencies. It also includes the custodians of wallet providers. As per the new directive, all these entities need to register in their respective states.
- Exercise extra caution for applications related to high-risk countries.
- It reduces the threshold limits for obliged entities. They are exempted from applying CDD measures for prepaid cards. It obligates identification of customers at remote locations where the transaction amount exceeds EUR 50.
- The new directive permits the anonymous prepaid cards issued in third countries that follow similar measures.
- It allows cooperation of financial intelligence units. They will get access to the virtual currencies.
- The authorities in the EU should carefully observe the use of digital currencies and prevent illicit use.
- It allows framing a new rule for owners of the digital currencies for self-reporting.
The twenty-eight member states in the EU have agreed to the new directive in April 2018.
The new directive allows the competent authorities to verify the information related to bank accounts and financial information so as to investigate, detect and prevent the anti-money laundering activities and prosecute the criminals.
The anti-money laundering act implemented by the EU provides transparency into the financial deals involving digital currencies. The new law prevents terrorism financing effectively and promotes legitimate use of the virtual currencies.