United Kingdom (and EU regulation)

ECON publishes report on the proposal for a regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets (recast)

On 1 April 2022, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a report setting out its proposed amendments to the draft regulation on information accompanying transfers of funds and certain crypto-assets (recast).

The Transfer of Funds Regulation (EU) 2015/847 was adopted to enhance the traceability of transfers funds by requiring payment service providers to ensure transmission of information on the payer and payee throughout the payment chain, to prevent, detect and investigate possible misuse of funds for money laundering and terrorist financing. Until now, crypto-assets have remained outside the scope of the Regulation. In July 2021, the European Commission presented a package of proposals to improve the EU’s anti-money laundering (AML) and combatting the financing of terrorism (CFT) rules.

The report welcomes the Commission’s proposal to recast the Transfer of Funds Regulation and puts forward the following key proposals:

The information obligation to verify customers should apply to crypto-assets transfers, regardless of the value of the transfer.
There should be no information transfers from/to un-hosted wallets, information should be obtained by the crypto-asset service provider directly from its customer.
Crypto-asset service providers should be expected to obtain information on the source and destination of crypto-assets involved in a transfer, they should establish effective procedures to detect suspicious crypto-asset activity.
Crypto-asset service providers should carry out counterparty due diligence in order to protect personal information.
A public register of non-compliant crypto-asset service providers.
To speed up adoption and ensure that crypto-asset service providers and other obliged entities put in place effective mechanisms to comply with the travel rule for combatting money laundering and terrorism financing, the current recast proposal should be decoupled from the rest of the new AML package and should be linked to the existing anti-money laundering AMLD framework until the entry into force of the new regime, while preserving the alignment with the upcoming Regulation on Markets in Crypto-assets.