The European Commission has published a proposal for a directive that will amend the 4th Anti-money Laundering Directive (4AMLD).

If the directive is made and brought into force, the EU Member States will be obliged to transpose it into their national laws by; and virtual currency exchanges, wallet providers, banks and other “obliged entities” will be required to comply with it from, 1 January 2017 – almost 6 months earlier than currently planned.

The Commission’s proposals will also lower the identification threshold for pre-paid cards from €250 to €150, to minimize the anonymous use of these products.

If made in its current form, the proposed directive will amend:

  • article 2(1) of 4AMLD, so that it applies “… to the following obliged entities: (1) credit institutions; (2) financial institutions; (3) the following natural or legal persons acting in the exercise of their professional activities … (g) providers engaged primarily and professionally in exchange services between virtual currencies and fiat currencies; [and] (h) wallet providers offering custodial services of credentials necessary to access virtual currencies“.  For these purposes, “virtual currencies” means “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically“;
  • article 12 of 4AMLD so that, “based on an appropriate risk assessment which demonstrates a low risk, a Member State may allow obliged entities not to apply certain customer due diligence measures with respect to electronic money, where [these] conditions are met: (a) the payment instrument is not reloadable, or has a maximum monthly payment transactions limited of €150 which can be used only in that Member State; (b) the maximum amount stored electronically does not exceed €150 [*]; (c) the payment instrument is used exclusively to purchase goods or services; (d) [it] cannot be funded with anonymous electronic money; [and] (e) the issuer carries out sufficient monitoring of the transactions or business relationship to enable the detection of unusual or suspicious transactions”. (* A Member State can increase this to €500, for payment instruments that can only be used in that Member State); and
  • repeal 3AMLD with effect from, and require the EU Member States to implement and apply 4AMLD to the obliged entities in their jurisdictions by, 1 January 2017 – almost 6 months earlier than the un-amended 4AMLD requires.

It’s not yet clear whether the UK’s Treasury will take advantage of the article 12 options.

In its related Q&As, the Commission explains that “… there is a risk that [virtual currencies] could be used by terrorist organisations to … conceal financial transactions as these can be carried out in an anonymous manner. That is why the Commission proposes to bring virtual currency exchange platforms and custodian wallet providers under the scope of [4AMLD], in order to help identify users who trade virtual currencies“.   It goes on to explain that, “Whilst several jurisdictions in the world, including some European Union Member States [including the UK’s FCA] and the European Banking Authority, have issued warnings about the risks that virtual currencies may entail, none have actually banned them. Virtual currencies are often considered as a useful tool for international payment transfers, low cost money remittance and close to instantaneous payments … The European Central Bank in its last report on virtual currencies … concluded that virtual currencies entail certain risks but do not … pose a threat to financial stability … Obviously, responsible  authorities will continue to monitor the developments in this area”. 

Posted by Cooley