The 5th AML Directive legislative process is nearing completion and could enter into force in March 2018.
One main update is that "virtual currencies" and electronic “wallet providers” will be subject to the provisions of the Anti-Money-Laundering Directive in the future. Platforms, which offer the exchange of virtual currencies against legal FIAT money, will now fall under the scope of the future directive. Exchanges that only grant the exchange of cryptocurrencies among themselves, do not seem to fall under it. The aim is to make sure that exchanges and wallet providers are subject to customer due diligence controls and help combat money laundering and terrorist financing related to the risk of anonymity with virtual currencies. In addition, it shall be ensured that users of cryptocurrencies can be identified more easily.
How does this affect me as a private individual or trader?
The new AML Directive applies primarily to financial institutions, investment firms, tax advisers and accountants, notaries and lawyers, etc. as far as they transfer or receive payments in the amount of EUR 10,000, - or more in cash. If smaller amounts are added from the same source accounts, these are also recorded and summarized on an ongoing basis. Now also exchange platforms for virtual currencies and wallet providers are obliged under the directive.
Therefore a financial institution has the duty of care to verify these respective incoming payments in terms of origin and taxation. As an owner or user of virtual currencies, I am again obliged to provide the corresponding documentation and proof of origin. If I am unable to do so as a bank customer, the payment could be rejected by the financial institution and the notice will be passed on to tax authorities. A "cash out" of cryptocurrency earnings exceeding a certain amount will soon only be possible with appropriate documentation.
Why is documentation becoming more important?
The new policy further restricts anonymity. The tax authorities will increasingly see the market activities and resulting profits with advancing systems. As an investor or trader of virtual currencies, calculating the tax is becoming increasingly challenging - especially with a higher number of trades or trading across multiple exchanges.
In general, the "Financial Intelligence Units" will be given more power under the new Anti-Money-Laundering Directive. Essential seems the new possibility of rapid access to central registration offices and information of the holders of bank and payment accounts by means of centralized registers. National FIUs should also be able to obtain information allowing them associate virtual currency addresses to the identity of the owner. Finally the consequence will be that cryptocurrency exchanges will have to forward information to tax authorities in the near future.