The European Banking Authority (EBA) has recently issued comprehensive guidance for crypto firms to ensure compliance with anti-money laundering (AML) and terrorist financing (TF) requirements.
According to the watchdog’s press release, the move represents a significant step in the European Union’s ongoing efforts to combat financial crime within the nascent industry. The guidelines, which extend the EBA’s existing AML guidelines to crypto-asset service providers (CASPs), highlight crucial ML/TF risk factors and mitigating measures that CASPs need to consider.
Guidelines For Crypto Firms On Risk Assessment
The EBA’s guidelines, building upon the July 2021 legislative package by the European Commission, aim to reform the EU’s legal and institutional framework for AML and counter the financing of terrorism (AML/CFT).
Article 38 of the watchdog’s regulation mandates the EBA to issue guidelines on risk variables and factors that CASPs should consider when establishing business relationships or conducting digital asset transactions.
The EBA’s amendments to the Guidelines on Customer Due Diligence (CDD) emphasize the need for CASPs to assess ML/TF risks associated with their customers’ crypto-related activities. Additionally, suitable transaction monitoring systems and advanced analytics tools may be warranted for CASPs in certain circumstances, given the level of ML/TF risks involved.
The updated guidelines also stress providing staff with appropriate training to interpret monitoring system outcomes, particularly when advanced analytics tools are utilized.
Regarding correspondent relationships, the EBA offers guidance on identifying risks associated with respondents and specifies the type of CDD measures that firms should apply when engaging with CASPs.
EBA Cautions Retail Banks
According to the press release, amendments to the sector-specific guidelines for retail banks acknowledge the increasing engagement of credit institutions with crypto-asset providers.
Banks are advised to be aware of the increased risks when establishing business relationships with “unregulated crypto-asset service providers.”
Overall, the EBA’s latest guidelines represent a significant development in the regulatory landscape for the crypto industry. By extending AML requirements to crypto firms, the EBA aims to enhance the effectiveness of AML/CFT measures and promote financial integrity within the European Union.
Digital asset firms operating in the EU must carefully evaluate the ML/TF risk factors outlined in the guidelines and ensure compliance with the EBA’s directives. These measures will contribute to a safer and more transparent crypto ecosystem.
The total cryptocurrency market capitalization has experienced a significant decline of over $200 million since the approval of Bitcoin exchange-traded funds on Wednesday, January 10. At that time, the market had reached a notable milestone of $1.8 trillion. However, as of the present, the market capitalization has dropped and currently stands at $1.64 trillion.
Featured image from Shutterstock, chart from TradingView.com
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