EU transfer of funds rules amended for cryptos

Regulation (EU) 2015/847 on information accompanying transfers of funds ensures traceability of fund transfers, in particular with a view to prevent, detect and investigate money laundering and terrorist financing, but it only applies to transfers defined as banknotes and coins, scriptural money and electronic money. Regulation (EU) 2023/1113 of 31 May 2023 on information accompanying transfers of funds and certain crypto-assets ("Regulation") now extends the scope of the EU legal framework to transfers of virtual funds

The new rules shall apply to all transfers of funds sent or received by an (intermediary) payment service provider (“PsP”) established in the EU, including transfers of crypto-assets if the crypto-asset service provider (“CSP”) of either the originator or the beneficiary is registered within the EU. Nevertheless, the Regulation provides for numerous exclusions from its scope.

As is already the case under the existing regime, the payer’s PsP has to communicate the payer’s name, account number, address, official personal document number and customer identification number or place and date of birth. Communication of the legal entity identifier (“LEI”) or equivalent official identifier in certain circumstances is new. Furthermore, the payer’s PsP will have to communicate the payee’s name, payment account number as well as the LEI or equivalent official identifier where applicable. Other requirements of the existing regime are maintained: the payer’s PsP must verify the information unless the identity of the payer has been verified according to the customer due diligence rules of Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, as amended ("AMLD 4"), and the Regulation provides for fewer requirements if the transfer is within the EU or in the form of a batch file transfer.

Requirements regarding transfers involving crypto-assets are new. For such transfers, the originator’s CSP must make sure that the operation is accompanied, in addition to the personal information required for fund transfers, by the originator’s distributed ledger address if the transfer is registered on a network using distributed ledger technology (“DLT”) or similar technology, and the crypto-asset account number where it exists or where the transfer is not registered on a network using DLT. The originator’s CSP must also ensure the transfer of similar information about the beneficiary (except for specific personal data).

The payee’s PsP or the beneficiary’s CSP will have to implement effective procedures to verify if the transfer of information has been done in compliance with the Regulation. Missing or incomplete information shall be a factor in the assessment of suspicion of a transfer and may lead up to the rejection of it. Similar obligations shall apply to intermediary PsPs or CSPs. The same verification standards apply to both types of transfers. PsPs and CSPs must adopt the necessary internal policies, procedures and controls as specified by guidelines to be issued by the European Banking Authority. If necessary, PsPs and CSPs will be obliged to provide without delay all the information required by the authorities responsible for combatting money laundering and terrorism financing, for which the Regulation provides for extensive cooperation mechanisms.

Failure to comply with the Regulation is punishable by administrative sanctions and effective mechanisms to report breaches shall be established.

The Regulation will enter into force on 30 December 2024 and Regulation 2015/847 has been repealed with effect from that date.