Posted 1 year ago | by Ben Armstrong

Fifth Anti-Money Laundering Directive (5AMLD) hits Crypto Businesses

The European Union’s 5th Anti-Money Laundering Directive (5AMLD) will be in effect from January 10, 2020. The regulation was crafted to bring increased transparency to financial transactions, and is aimed at curbing money laundering and terrorist financing across Europe.

5AMLD pushes back against money laundering and terrorism financing by making crypto transactions less secret, and 5AMLD is expending its regulatory scope in crypto service providers like virtual-fiat exchanges or custodian wallet providers.

A 5AMLD fact sheet describes some of the more important points (from 5AMLD source) – 5AMLD will:

  • Increase transparency about who owns legal entities to to prevent money laundering and terrorist financing via opaque structures

  • Give European financial regulators better access to information via centralized bank account registers

  • Tackle terrorist financing risks linked to anonymous use of virtual currencies and prepaid instruments

  • Improve the cooperation and exchange of information between anti-money laundering supervisors and with the European Central Bank

  • Broaden the criteria for assessing high-risk third countries and ensure a high level of safeguards for money moving to or from such countries.

New Fines for Non-Complying Businesses

Crypto businesses have to pay fines for non-compliance with the new 5AMLD regulations. These new laws may make European crypto businesses less profitable, and drive developers into other markets.

European crypto companies are struggling to meet the new regulatory guidelines launched by 5AMLD. There are several businesses are shutting down due to the extensive know-your-customer (KYC) and anti-money laundering (AML) regulations.

5AMLD is Already Shutting Down Businesses

Bottle Pay, the UK-based crypto wallet provider, announced that it would cease operations at the end of last year in a blog post published on Dec. 13, 2019.

From that post:

“As we are a UK based custodial Bitcoin wallet provider, we will have to comply with the 5AMLD EU regulation coming into effect on January 10, 2020. The amount and type of extra personal information we would be required to collect from our users would alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”

Bottle Pay was launched in June 2019 and raised $2 million in seed funding this past September before shuttering operations. The company offered users a tipping service that lets small amounts of cryptocurrency be sent across social media networks and messenger apps.

5AMLD may or may not help governments shut down bad actors, but it will drive smaller crypto companies out of the European market. There are many other areas where businesses can grow, which may be an issue for the EU as crypto developers look for greener pastures.