Virtual Currencies and Anti-Money Laundering – The Shortcomings of the 5th AML Directive (EU) and How to Address Them

Journal of Banking Regulation (2020), Volume 21, Issue 2, pp. 125-138

23 Pages Posted: 14 Feb 2019 Last revised: 18 May 2020

See all articles by Lars Haffke

Lars Haffke

Technische Universität München (TUM) - TUM School of Management

Mathias Fromberger

Technische Universität München (TUM) - TUM School of Management

Patrick Zimmermann

Technische Universität München (TUM) - TUM School of Management

Date Written: February 3, 2019

Abstract

Virtual currencies pose a serious threat to be used for money laundering, weakening the European Union’s financial system. Directive (EU) 2018/843 (the fifth anti-money laundering Directive) intends to mitigate these risks by introducing a definition of virtual currencies within Union law. Some service providers connected to virtual currencies are made subject to anti-money laundering law. Member States are required to transpose this Directive into national law by January 2020. Consultations on national level are currently ongoing.

This article analyses how the Directive applies to current forms of cryptocurrencies, their adjacent services and intermediaries. It highlights the Directive’s imprecise wording as well as its limited scope. If Member States transpose it verbatim, they will create legal uncertainty and loopholes for relevant entities. Therefore, this article seeks to contribute to the national consultations of Member States by providing concrete legislative recommendations on how to fix the Directive’s shortcomings.

Keywords: money laundering, anti-money laundering (AML), virtual currencies, cryptocurrency, token, Blockchain, ICO, Directive (EU) 2018/843

JEL Classification: K2, K22, K23, K29

Suggested Citation

Haffke, Lars and Fromberger, Mathias and Zimmermann, Patrick, Virtual Currencies and Anti-Money Laundering – The Shortcomings of the 5th AML Directive (EU) and How to Address Them (February 3, 2019). Journal of Banking Regulation (2020), Volume 21, Issue 2, pp. 125-138, Available at SSRN: https://ssrn.com/abstract=3328064 or http://dx.doi.org/10.2139/ssrn.3328064

Lars Haffke (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, Bavaria 8033
Germany
+498928925348 (Phone)

HOME PAGE: http://www.law.wi.tum.de

Mathias Fromberger

Technische Universität München (TUM) - TUM School of Management ( email )

München
Germany

HOME PAGE: http://www.law.wi.tum.de

Patrick Zimmermann

Technische Universität München (TUM) - TUM School of Management ( email )

München
Germany

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