Anti-Money Laundering laws for crypto assets in the European Union

Financial Technologies, decentralized finance, and crypto assets and currencies are buzzwords when looking at today’s financial sector. Disrupting new technologies and financial instrument change the landscape of how financial services are provided and received from customers. But new problems emerge with these new changes. Supervisory authorities and legislators “have their hands full” in order to provide a regulatory financial framework on the one hand, which at the same time on the other hand also allows new technologies to be created and developed. The design and construction of such framework, however, brings along some complications. One of the biggest difficulties in the financial sector is the prevention of the money laundering issue. Over the last years several directives and regulations have been implemented throughout the European Union to combat this issue. But depending on the legislative instrument used to facilitate monitoring and supervision in the EU the problem of heterogeneous legislative approaches can arise. With the diversity resulting from multiple different solution to the same problem the exploitation of weaker legislation in some member states by criminals is not to be denied. Therefore, a uniform regulation is needed, which makes the implementation of money laundering prohibitions both clearer and more transparent, and which facilitates and supports international cooperation between EU member states. At the same time with the introduction of crypto assets in the financial market these guidelines are again faced with a challenge. New monitoring approaches, such as the principle Know-Your-Customer (KYC) are used by regulators to counter the incentive and use of crypto assets for illegal activities such as money laundering. The question if this approach is sufficient for combating money laundering, with crypto assets and in its traditional form, and what other potential new problems it entails will be examined in more detail in this paper.