https://benchmarkbeat.com/crypto/crypto-is-a-top-money-laundering-threat-warning-the-new-eu-watchdog/

Europe’s new money laundering watchdog warns that crypto assets are the biggest challenge to stop dirty money permeating the local financial system.

Bruna Sego, chairman of the EU anti-money laundering agency, told the Financial Times that the crypto market is a clear priority as it is “substantially exposed to money laundering and terrorist financing risks.”

Under the new PAN-EU licensing framework launched earlier this year, Europe had to be particularly guarded by these risks as “our market is very fragmented and many crypto asset service providers are trying to obtain licenses here.”

Cryptocurrencies also raised risks due to their cross-border nature, their ability to hold anonymously, and the speed at which they could be transferred, she said.

Created last year, AMLA only officially assuming legal authority on July 1, demonstrated its intention to focus on the crypto sector by warning in a statement on Tuesday about the risk of “inconsistent management” between EU national regulators.

Szego emphasized that regulators “need to see beneficial owners of Crypto Asset Service Providers.” She added: “We need to make sure the owner is not involved in money laundering or terrorist finances.”

Bruna Szego: “Some crypto asset service providers are likely one of the first 40 financial institutions we will directly oversee” ©AML

French prosecutors said earlier this year that the world’s largest cryptocurrency exchange was investigating binance on allegations the company denied after breaking the EU’s laundry and terrorist financing laws.

Binance co-founder Changpeng Zhao resigned as chief executive in 2023, and was later sentenced to four months by US officials and fined $4.3 billion for preventing money laundering and international sanctions violations.

Szego said that AMLA will take over the direct supervision of around 40 of the largest and most potentially most dangerous institutions in the EU in 2028, “some cryptocurrency service providers are likely one of the first 40 financial institutions we will directly oversee.”

Her critical comments reflect those of the Financial Action Task Force, an intergovernmental agency established last month to combat terrorist financing and money laundering, which many parts of the world said they have “continued to struggle” with regulating crypto assets. It estimates that 75% of jurisdictions worldwide do not fully comply with their requirements.

However, these warnings contrast with the more encryption-friendly approach adopted by the US administration under President Donald Trump. Washington is approaching passing legislation to remove some well-known enforcement cases against digital asset groups and to further consolidate the sector more closely into the mainstream financial system.

Szego said AMLA will consider several initial options to tackle crypto assets risks.

The Frankfurt-based authorities currently have only 30 staff, but are rushing to hire more with plans to reach 240 by the end of 2028 and 240 to 240 by the time they begin direct supervision in 2028.

On Tuesday, AMLA said that licensing of EU crypto companies was done during regulatory standards that “there is a risk of divergence in application” as licensing of EU crypto companies was done by Bloc’s 27 national authorities.

It has committed to using its authority to oversee national authorities and ensuring that it will only approve crypto companies with effective compliance systems “from day one.” Szego said it is important for crypto companies to “put people on board who understand” anti-money laundering and counter-terrorism funding.