The European Parliament and the Council of the European Union have proposed amending a directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.



“Directive (EU) 2015/849 of the European Parliament and the Council constitutes the main legal instrument in the prevention of the use of the Union's financial system for the purposes of money laundering and terrorist financing. That Directive, which is to be transposed by 26 June 2017, sets out a comprehensive framework to address the collection of money or property for terrorist purposes by requiring Member States to identify, understand and mitigate risks related to money laundering and terrorist financing”, the proposal said.



In the wake of certain modern technology services becoming increasingly popular as alternative financial systems, the proposal called for further measures to improve the existing preventive framework. It noted that providers of exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers, are currently under no obligation to identify suspicious activity. This enables terrorist groups to transfer money into the EU’s financial system or within virtual currency networks by concealing transfers or by benefiting from a certain degree of anonymity on those platforms.



Emphasizing on a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship, the proposal stated:



“It is therefore essential to extend the scope of Directive (EU) 2015/849 so as to include providers engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. For anti-money laundering and countering the financing of terrorism (AML/CFT) purposes, competent authorities should be able to monitor through obliged entities the use of virtual currencies”.



Furthermore, the proposal also pointed out that the inclusion of virtual currency exchange providers and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as virtual currency users can also transact without these providers. To address this problem, it suggested:



“[N]ational Financial Intelligence Units (FIUs) should be able to obtain information allowing to associate virtual currency addresses to the identity of the owner of virtual currencies. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed”.