Anti-Money Laundering (AML) authorities in Europe are trying very hard to ensure that crypto firms operating in the region comply with the AML rules. Several regulation committees, such as the Financial Action Task Force (FATF), are now calling for a stricter approach to digital currencies.
According to data from crypto analytics firm Chainalysis, crypto-based crime had hit an all-time high in 2021. It indicated that illicit addresses received about US$14 billion in 2021.
Although the FATF has always been a debatable issue, several regions of the European Union favour implementing it to identify crypto users and trace the funds and transactions. However, the industry remains apprehensive about the FATF rules as they claim that they could harm privacy and innovation.
Therefore, it was not surprising to see MONEYVAL, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, calling upon stricter and coordinated efforts to adopt regulation rules.
Enhanced regulation and supervision
In its annual report for 2021, MONEYVAL assessed the need for action to combat money laundering. In its report released on 4 May 2022, MONEYVAL has evaluated the issues in 34 jurisdictions.
Elzbieta Frankow-Jaskiewicz, Chair of MONEVYAL, stated that professional gatekeepers, such as lawyers, and accountants, are a part of the money laundering racket. She added that cryptos are increasingly used to launder money, especially in the DeFi sector.
Frank-Jaskiewicz said that the increasing use of cryptos is posing challenges in combating money laundering. With virtual assets being primarily made available via the internet, it can lead to scams as often high-net-worth individuals opt for it to evade taxes.
Even the EU Commissioner highlighted the shortcomings of digital assets and said that DeFis are often prone to scam fraud and other quasi-anonymous transactions.
Not meeting the standards
The MONEYVAL report also figured that a considerable number of jurisdictions don’t meet the AML standards. It highlighted that at the end of 2021, approximately 18 out of 22 jurisdictions evaluated were found to be insufficient in compliance with AML standards.
To conclude, the crypto regulations have increased by the day. The regulators are keen to keep a tab on all crypto-related activities to control money laundering and scams. At the same time, they are focussed on protecting the investors who often get duped amid all this.
As market participants, all individuals must ensure that they do proper market research and keep tabs on the latest developments before jumping on the crypto bandwagon to mitigate losses.
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