The Fifth Money Laundering Directive | Law&Trust International

The Fifth Money Laundering Directive

The fifth AML directive of the European Union entered into force on January 10, 2020, and managed to bring significant changes both in measures to prevent money laundering attempts and in the cryptocurrency services market, exchangers and exchanges, which were based on anonymity and ease of operation.

What are the innovations?

  1. Reduction of limits for anonymous transactions to 50 euros and for electronic balances, including on prepaid cards, from 250 to 150 euros.
  2. The list of third-country high-risk countries has been revised.
  3. The list of politically significant persons has been revised.
  4. Restriction of anonymous prepaid cards issued outside the EU.
  5. The effect of AML legislation has been expanded on providers of exchange services between virtual currencies (which includes cryptocurrency) and fiat money, providers of services for holders of virtual currency wallets. It is worth noting that the wording used in the Directive is very similar to those used for the definition of a licensed type of cryptocurrency activity in Estonia, which is also currently undergoing changes. In addition, these types of activities do not provide a clear explanation of whether the Directive applies to actions for exchanging virtual currencies for other virtual currencies or only for exchanging between virtual currencies and fiat funds.
  6. The concept of virtual currencies is introduced. Virtual currencies are a digital representation of value not issued or guaranteed by the central bank or government agency, not linked to a legally established currency and not having the legal status of currency or money, but accepted by individuals or legal entities as a medium of exchange that can be transferred, stored and sold electronically.
  7. A direct ban on the opening, use, and maintenance of anonymous accounts, anonymous bank books.
  8. Enhanced due diligence measures are envisaged for customers from third countries.
  9. It is planned to introduce a unified database of clients of financial institutions and beneficiaries.

What has changed for cryptocurrency projects?

First of all, the Law and Trust International team would like to note that for the projects conducted by our specialists, no significant changes have occurred.

If you follow all the requirements of the AML policy developed by Law and Trust lawyers, you are ready for the changes that have come into force.

The same applies to all cryptocurrency institutions that have previously received permission from the financial regulators of the European Union.

However, innovations affect a wide range of cryptocurrency business projects that positioned themselves as IT companies, aggregators, and so on, since such companies did not implement anti-money laundering rules, did not identify users and counterparties, and did not receive any permissions from financial regulators.

Are all projects affected?

As mentioned earlier, the Directive applies only to the territory of the European Union, but it is worth noting the fact that after the EU, many countries will follow its example in the issue of cryptocurrency regulation.

At the moment, companies registered outside the European Union and not having customers from the EU are not affected by these changes.

Effects

A large number of exchanges are leaving the EU in response to the adoption of the fifth AML directive.

Others decided to change jurisdiction, transferring their projects to Panama, Seychelles and other far-away countries.

Decision

The decision on the future of the project always falls on the shoulders of its owners. Law and Trust provides advisory and legal support both in matters of legalizing a cryptocurrency business by obtaining a license, setting up AML processes and in transferring or closing a business.

If you want to know whether the changes affected you and what actions you need to take, contact our manager.

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