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The rapid growth of crypto-assets in the EU needs to be accounted for in the trading bloc’s financial crime package, the EU’s banking watchdog chief has suggested in a letter to co-legislators.
One of the standout components of the EU’s financial crime package last year was the Anti-Money Laundering Authority (AMLA) Regulation.
This new authority will be tasked with AML supervision in the EU and is designed to become the centrepiece of an integrated system of national anti-money laundering/counter-terrorism financing (AML/CTF) supervisory authorities, ensuring mutual support and cooperation.
The European Commission has proposed that the AMLA takes over the management of two existing infrastructures: the AML/CTF database, which is currently managed by the European Banking Authority (EBA); and the secure communication network for financial intelligence units (FIU.net), which has been hosted by Europol.
In accordance with Articles 12 and 13 of the draft legislation, entities that are not classified as credit institutions or financial institutions are not eligible for direct supervision by the AMLA, regardless of the level of risk that is presented by these institutions to the internal market.
This means that entities such as crypto-asset service providers (CASPs) will not be directly supervised by the AMLA.
“AML/CFT experts have observed rapid growth of this sector in recent years and consider that this sector is exposed to very high ML/TF risks based on the nature of products and services offered, which often allow anonymity, the prevalence of large volumes of cross-border transactions, and business models that are often complex and unusual,” Jose Manuel Campa, the EBA’s chair, wrote in the letter.
If CASPs remain excluded from direct supervision by the AMLA, the main concern is that the increased risks associated with them may not be managed effectively at the EU level, he suggested.
He also noted that experts have said it is crucial that the AMLA play the leading role to ensure that the AML/CTF framework is implemented effectively.
The EBA chair also suggested that co-legislators and the European Commission consider the possibility of expanding the eligibility selection criteria in Article 12 to ensure that high-risk CASPs may also be directly supervised by the AMLA.
The letter argues that the draft AMLA Regulation should provide the necessary legal gateways to facilitate this.
“AML/CFT experts consider that CASPs should be subjected to the same eligibility and qualifying selection criteria as those set out in Articles 12 and 13 in respect of credit- and financial institutions.”
Campa made the intervention on behalf of the EBA’s AML/CTF Standing Committee, which consists of 57 experts at the member state level.
The letter also suggests that cooperation clauses set out in the 6thh Anti-Money Laundering Directive (which is part of the EU’s package) need to be expanded so that services, including payments and e-money, are better accounted for.
For example, provisions in the directive limit interactions to those between the AML/CTF supervisors and prudential supervisors of credit institutions.
“There appears to be no cooperation foreseen between financial and non-financial supervisors and prudential supervisors responsible for other sectors, such as payment institutions, investment funds or life insurance,” the letter suggests.
At the same time, the experience of AML/CTF experts shows that the absence of an explicit requirement on behalf of different supervisors to cooperate, hampers cooperation and information exchange, and may even be perceived as a legal obstacle to cooperation.
As a result, the objective of improved supervision of obliged entities may not be met, Campa warned.
