On 2 June 2020 the European Parliament posed questions relating to the registration and monitoring of Virtual Asset Service Providers (VASPs) in Member States as required by the provisions of the 5th EU Anti-Money Laundering Directive (5AMLD). VASPs include virtual currencies, fiat currencies and custodian wallet providers.
Responses were received from the Financial Markets Law Committee (FMLC) and European Commission on 26 and 27 August respectively.
The European Commission note that, as of August 2020, a total of 11 Member States plus the UK have fully transposed the provisions of 5AMLD into national law as required by 10 January 2020. Further, infringement proceedings are being implemented against those which are currently in the position of partial or no transposition. The European Commission also makes clear that it will strongly consider recommendations made by the Financial Action Task Force (FATF) relating to VASPs when drafting its planned crypto-asset regulation. This, alongside the establishment of a single rule book and an EU level anti-money laundering (AML) supervisory function, is anticipated to be legislated by the EC in the first quarter of 2021.
The FMLC infers that the existing definition of virtual currencies may be too narrow and lacking in clarity, which may lead to under-regulation or exposure of loopholes which criminals can exploit. It urges the EU to consider clarifying and broadening the definition of “virtual currencies” in future legislative text and guidance. The FMLC also suggests that an enhancement to the EU’s AML framework could be the use of Legal Entity Identifiers (LEIs) as part of disclosure requirements for custodian wallet service providers and firms offering cryptoasset exchange services.