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Cryptocurrencies and anti-money laundering: the shortcomings of the fifth AML Directive (EU) and how to address them

Author

Listed:
  • Lars Haffke

    (Technical University of Munich)

  • Mathias Fromberger

    (Technical University of Munich)

  • Patrick Zimmermann

    (Technical University of Munich)

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.

Suggested Citation

  • Lars Haffke & Mathias Fromberger & Patrick Zimmermann, 2020. "Cryptocurrencies and anti-money laundering: the shortcomings of the fifth AML Directive (EU) and how to address them," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(2), pages 125-138, June.
    • Handle: RePEc:pal:jbkreg:v:21:y:2020:i:2:d:10.1057_s41261-019-00101-4
    DOI: 10.1057/s41261-019-00101-4
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    Citations

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    Cited by:

    1. Nasir Sultan & Norazida Mohamed & Mervyn Martin & Hafizah Mohd Latif, 2023. "Virtual currencies and money laundering: existing and prospects for jurisdictions that comprehensively prohibited virtual currencies like Pakistan," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 27(2), pages 395-412, May.
    2. de Andrés, Pablo & Arroyo, David & Correia, Ricardo & Rezola, Alvaro, 2022. "Challenges of the market for initial coin offerings," International Review of Financial Analysis, Elsevier, vol. 79(C).
    3. Corina-Narcisa (Bodescu) Cotoc & Maria Nițu & Mircea Constantin Șcheau & Adeline-Cristina Cozma, 2021. "Efficiency of Money Laundering Countermeasures: Case Studies from European Union Member States," Risks, MDPI, vol. 9(6), pages 1-19, June.

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