High-Risk Financial Institutions are entities identified by regulators as having an elevated susceptibility to being exploited for money laundering or terrorist financing activities. These institutions may operate in sectors with inherent risks, deal with high-value transactions, or serve clients from jurisdictions with weak anti-financial crime controls. They are subject to enhanced due diligence and stricter regulatory scrutiny. The designation necessitates more rigorous compliance measures.
Context
The classification of certain cryptocurrency businesses as High-Risk Financial Institutions is a significant factor in shaping regulatory approaches to the digital asset sector. Discussions focus on developing precise criteria for this designation and ensuring proportionate compliance burdens. A critical future development involves the continuous refinement of risk assessment methodologies to accurately account for the unique characteristics and evolving threat landscape of digital asset services.
CASPs must integrate bank-level AML/KYC for transactions exceeding €1,000 and cease offering anonymous wallets, fundamentally altering the EU's compliance architecture.
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