European Banking Authority extends anti-money laundering guidance to digital assets

The European Union banking watchdog has extended the bloc’s anti-money laundering (AML) guidelines to digital asset firms in the hope that it “harmonizes” the industry’s approach to fighting financial crime.

On Monday, the European Banking Authority (EBA) extended its guidelines on money laundering and terrorist financing risk factors to crypto-asset service providers (CASPs) whilst highlighting mitigating measures digital asset companies should implement.

“CASPs can be abused for financial crime purposes, including money laundering and terrorist financing,” said the EBA, explaining its reasoning for extending the guidelines. “The risks of this happening can be increased, for example, because of the speed of crypto-asset transfers or because some products contain features that hide the user’s identity.”

The banking watchdog went on to state that “it is important that CASPs know about these risks and put in place measures that effectively mitigate them.”

The amendments to the guidelines aim to help digital asset firms identify risks by providing a list of different factors that may affect exposure, including those related customers, products, delivery channels, and geographical locations.

The EBA guidelines also outlined how digital asset firms should adjust their risk mitigation using tools such as “blockchain analytics.”

By extending the scope of the AML/CTF risk factors guidelines, the EBA hopes it “harmonizes” the approach that digital asset firms across the EU adopt to combat financial crime.

The amended guidelines will apply from December 30, 2024, and the deadline for national authorities across the EU to report whether they comply with the guidelines will be two months after the publication of the translations into the bloc’s various official languages.

The EBA’s updated AML guidelines are the latest measure to come after the EU passed in to law its landmark Markets in Crypto-Assets (MiCA) regulations in 2023. When it eventually comes into force later this year, it will bring with it a comprehensive regulatory regime tailored to digital assets.

In July 2023, the European Securities and Markets Authority (ESMA), the European Union’s financial markets regulator and supervisor, published its first consultation package under MiCA, which handed ESMA more powers to regulate the digital asset space.

The 158-page consultation was the first major set of proposals to come after the passage of MiCA and included measures on how digital asset firms should handle complaints and conflicts of interest.

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