Anonymous currencies such as bitcoin could be outlawed under a European Union plan to tackle terrorism. The idea has been floated in an ‘action plan for strengthening the fight against terrorist financing’, published this week, with new laws potentially being introduced as early as June 2016.
“Innovation in financial services and technological change… creates new opportunities, which may sometimes be abused to conceal terrorist financing. New financial tools, such as virtual currencies, create new challenges in terms of combating terrorist financing,” claimed the document.
It continued: “It is critical to be able to manage the risks relating to their anonymity, such as for virtual currencies. Critical to this question is less the forms of payment themselves, but rather whether they can be used anonymously.”
In addition to ending the anonymity of virtual currencies, the EU plan also calls for compulsory checks on money transferred from countries designated as terrorist high risks, and more power for ‘financial intelligence units’, which will have the power to access central bank and banks’ payment account registers.
It also called to lower the threshold required for identification when buying pre-paid debit cards.
Naturally, the document also included the usual caveats about protecting “fundamental rights, including data protection, and economic freedoms”.
However, Michael Ruck, an associate and banking industry expert at law firm Pinsent Masons, warned that the plans would inevitably have an impact on business use of virtual currencies.
“Bringing virtual currency exchange platforms under the scope of the anti-money laundering directive will have a significant impact upon the speed and attractiveness to many of the use of virtual currencies,” he told Pinsent Masons’ own legal website, Out-law.com.
He continued: “While it has long been stated by prosecuting authorities that such currencies are a haven for money laundering and related criminal activity, these currencies are used by a large number of companies and individuals who may otherwise have no access to the traditional banking system.”
And changes to anti-money laundering laws mooted in the action plan could have serious consequences for businesses in the UK, he added.
“Any changes to the definition of money laundering offences may have a significant impact on the UK’s own anti money laundering systems and controls. One can only wait and see if a failure to prevent money laundering offence for corporates may be considered by the EU, along similar lines to the offence of failing to prevent bribery as set out in the Bribery Act,” he said.
The EU’s fourth Anti-Money Laundering Directive was only adopted in May 2015. However, neither the Directive, nor the strategy, makes any mention of the main money laundering tool in the European Union – the €500 note.