The issue of AML, as well as Bitcoin regulation, is of utmost importance to operators of virtual currency-related services and to operators providing digital wallet services, who under Legislative Decree 231/2007, are qualified for all intents and purposes as obligated to apply AML regulations.
However, this is also the case for end users whose conduct, whenever they carry out crypto transactions, may be heavily affected or restricted, especially when banking intermediaries are involved. Notoriously, banks (some in particular) dislike that their customers tinker with cryptocurrencies and are always ready to freeze funds or block their transfers, even going so far as to close bank accounts in some cases, with the justification (or pretext) of the hypothetically suspicious nature of certain transactions.
This de facto “power” is given to banking intermediaries precisely by the anti-money laundering legislation, which imposes an obligation to abstain in the presence of suspicious transactions. However, the problem is that the set of provisions is so broadly worded that it does not allow (or allows with extreme difficulty) for easy verification of whether this type of interdiction power is being exercised in a legitimate and reasonable manner or, on the contrary, in an arbitrary manner.
Anti-money laundering measures and the new provisions regarding Bitcoin regulation
Recently, the MEF with a very recent circular (Protocol No. 56499, which replaces the previous circular Prot. No. 5. 54071 of 2017) has provided new guidance on AML sanction proceedings.
Obviously, this is a document of extreme interest to cryptocurrency traders.
The circular is titled: “Operational instructions on the sanctioning procedure referred to in Article 65 of Legislative Decree No. 23 of November 21, 2007, as amended by Article 5 of Legislative Decree No. 90 of May 25, 2017, laying down provisions for the transposition of Directive (EU) 2015/849 (the so-called Fourth AML Directive).”
It is divided into a reconnaissance and reconstructive part, in which it reviews the list of all categories of obligated entities and dwells on the obligations to which they are subject (obligation of due diligence, obligation to report suspicious transactions, obligation of retention, etc.).
However, the most useful aspect lies (or should lie) in a series of practical, operational indications, precisely, that the ministry directs to the central and territorial offices of the Ministry of Finance, with respect to the procedures for the imposition of sanctions.
One of the most important issues lies in the delineation of a whole series of criteria aimed at establishing how the sanctions to be imposed for violations of the suspicious transaction reporting obligation should be graded.
In relation to the failure to report suspicious transactions, Article 58 of Legislative Decree 231/2007, in fact, provides for a “basic” sanction (3,000 euros) in paragraph 1, but in paragraph 2 particularly qualified (and aggravated) cases are provided for, when the violation is characterized as being serious, repeated, systematic and multiple.
In the presence of one or more of these characters, therefore, the law provides that the penalty to be applied can range from 30,000 to 300,000 euros.
The explanatory effort is evident in the document and that of providing criteria as objective as possible for a quantification of penalties that can withstand possible opposition.
The regulations also provide a series of additional criteria for the modulation of possible violations, consisting of a) the intensity and degree of the subjective element; b) the degree of cooperation with the authorities; c) the relevance and evidence of the reasons for suspicion, also having regard to the value of the transaction and the degree of its inconsistency with respect to the characteristics of the client and the related relationship; d) the repetition and diffusion of the behavior.
These are all elements that, from time to time, must be adequately evaluated and weighted by placing the size of the penalty within three brackets: from 30,000 to 120,000, from 120,000 to 210,000, and from 210,000 to 300,000 euros.
Penalties in the area of anti-money laundering
For example, according to the MEF, the characters of systematicity and intrinsic seriousness of the sanction carry greater weight, and their possible recurrence would justify the imposition of higher sanctions. Therefore, “multiple” and “serious” violations would merit a sanction in the range of 120,000 to 210,000 euros or 210,000 to 300,000 euros, depending on the level of intrinsic seriousness; violations characterized by systematicity would merit a sanction in the range of 120,000 to 210,000 euros, while if the character of seriousness also occurs, regardless of the level of the latter, a sanction in the range of 210,000 to 300,000 euros should certainly be applied. Finally, a penalty in the lower range of 30,000 to 120,000 euros should be applied to a merely “repeated” violation.
The offices therefore, once the range has been identified for the correct placement within it should consider the multiple criteria set forth in Article 67 of Legislative Decree 231/2007, such as the duration of the violation, the financial capacity of the perpetrator, the benefits obtained as a result of the offense, the extent of the harm caused to third parties, etc.
Interesting is the clarification that the high value of the transaction should not in itself constitute an indicator of anomaly, but that it should nevertheless be assessed in the overall picture that characterizes both the specific transaction and the profile of the person who carries it out.
Similar schemes are also proposed with reference to the remaining cases of violation of AML obligations: thus, due diligence, retention obligation, etc.
Will Bitcoin regulation become more strict?
Now, despite the efforts, this act of guidance does not eliminate the wide profiles of opinability that remain attributed to the offices, both with respect to the actual existence of some specific cases of violation (which are often pegged to vague indicators of anomaly), and with respect to the existence of the various indicators of seriousness.
Thus, ample room remains open for reviewing the legitimacy of the offices’ actions, possibly both at the administrative and judicial stages. This, however, is possible as long as the reasons supporting the charges and accompanying the assessment in the quantification of sanctions are adequately explained and argued, thus making it possible to understand the reasoning leading to the imposition of sanctions and to assess the profiles of logicality, reasonableness, proportionality and non-contradictory.
On the other hand, it is clear that the real crux of the matter lies mainly in the legislative framework of reference, which, as mentioned above, on the one hand is extraordinarily punitive and imposes burdensome fulfillments, and on the other hand grants sanctioning powers with broad and insufficiently defined boundaries.
It remains to be seen whether the newly installed government will have the capacity to put its hand to this regulatory framework: in its first public statements, the manifestation of a willingness to raise the thresholds for limiting cash transactions is an important signal that could highlight a different sensitivity on the issue of AML and, hopefully, also a different approach.
An approach that, at this point, should necessarily also invest the field of cryptocurrencies, often the subject of unjustified prejudice and just as often placed in correlation with illicit trafficking and tax evasion, and for which problems not dissimilar to those of cash transactions arise.
We have already had occasion to write about the fact that the correlation between cryptocurrencies and the criminal economy is belied, numbers in hand, by authoritative studies (such as the very recent one by Chainalysis), and that the punitive framework emerging from the anti-money laundering legislation results in restrictions on businesses in the area of cryptographic technologies and applications whose initiatives can produce wealth and high value-added employment, which are not good for the country’s economy.
All that remains is to wait and see what initiatives will be taken by the majority coalition, at the parliamentary and government levels.