European Watchdog Agency Cites Crypto As AML Risk


In their 2021 annual report, MONEYVAL has named crypto assets and DeFi a significant risk for anti-money laundering efforts.

Some cryptocurrencies exist only for money laundering, says MONEYVAL chair

The European Council’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) has released its 2021 annual supervision report. In a personal note, MONEYVAL chair Elżbieta Frankow-Jaśkiewicz specifically addressed two major risks for AML efforts. 

One of these risks is “gatekeeper” professions, such as lawyers and accountants, which played a role in the infamous Panama Papers and Pandora Papers. In 2016 and 2021, these leaked documents demonstrated how high-net-worth individuals, including an extensive list of government officials, erected offshore shell companies for the purpose of money laundering and tax evasion. 

Furthermore, the MONEYVAL report cited crypto assets as an emerging threat. Frankow-Jaśkiewicz notes that the methods money launderers use are becoming more sophisticated and larger in scale, adding:

There is suspicion that some of the smaller cryptocurrencies are being set up specifically with the motive of laundering. The larger virtual assets are seeing heavy market manipulation, which is a major predicate offense for money laundering.

More regulatory pressure for DeFi protocols?

Moreover, Frankow-Jaśkiewicz specifically addressed DeFi protocols as potential facilitators for money laundering. She stated:

In most cases, the components of one single crypto-business are spread across multiple countries. It creates enforcement and supervisory challenges for governments, due to rapidly evolving tech infrastructure, the crossborder nature of financial services, and difficulties in determining the national jurisdiction responsible for their oversight.

This might add to the growing divide among EU regulators regarding crypto assets. Earlier this week, industry expert Patrick Hansen commented on this matter, stating that the European Commission is well-educated about DeFi, as demonstrated by the EC’s 2022 European Financial Stability and Integration Review. However, the review contains some worrisome passages that might put regulatory pressure on DeFi developers.

Hansen also noted that, while the commission generally has a forward-looking stance on crypto regulation, the European Parliament is a lot more skeptical on the subject. In March, the parliament voted for a bill that would restrict the usage of noncustodial wallets. 

Also in March, the European Commission dismissed a bill that would ban Proof of Work cryptocurrencies such as Bitcoin. Internal documents, however, show that the threat of a POW ban is not off the table yet.