Banca d’Italia has issued a communication to payment service providers and crypto asset service providers (CASPs), reinforcing the need for continued screening of financial transactions using travel rule-related procedures, stressing that there are no minimum amounts for these checks.
Banca d'Italia Tightens Crypto Screening to Enforce EU Sanctions
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Key Takeaways
- Banca d’Italia ordered crypto firms to screen every transaction, aiming to block EU sanctions evasion.
- The bank banned minimum screening thresholds to stop criminals from splitting funds to avoid detection.
- The tighter rules prioritize blocking Russian actors over speed, accepting potential delays in transfers.
Italy Highlights ‘No Minimum’ Exception for Sanctions Screening on Crypto Transactions
The European Union (EU) is concerned about the use of using digital assets to circumvent its established sanctions framework, and central banks in the region are tightening compliance measures to prevent illicit actors from leveraging regulatory gaps.
On Wednesday, Banca d’Italia, Italy’s central banking institution, issued a communication prompting all payment services providers (PSPs) and crypto asset service providers (CASPs) to strengthen their screening procedures for financial transactions, given the recent intensification of geopolitical tensions.
The bank stressed that these institutions must execute compliance checks on their own customers when starting the relationship and when the EU Council determines it, and also every time a transaction happens, verifying both the names of the originator and the beneficiary of these transactions (as defined by the Travel Rule) against the list of designated individuals and companies.
Regarding how these checks must be executed, the bank stressed that the calibration of the automated systems actually reviewing transactions should be set “in a way that balances the need to limit the generation of false positives with the need to ensure the identification of designated subjects.”
Nonetheless, it highlighted that “the application of minimum amount thresholds for subjecting transfers to checks is not foreseen,” and called on intermediaries, including CASPs, to “ensure that the systems in use – including solutions developed or provided by third parties – do not include minimum amount thresholds that would result in the limitation of transfers to be subjected to checking.”
Dividing financial amounts to avoid detection or reporting by automated systems is called structuring, a practice often employed by criminal actors or collectives facing sanctions.
Banca d’Italia’s communication calls on financial actors to strengthen their controls and avoid allowing sanctions sidestepping because of misconfigured systems, even at the cost of increased vigilance and delaying transfers, especially as the last round of EU sanctions targets Russian actors and the digital rule network explicitly.
