Mandatory Notification of Cryptocurrency Transactions Introduced in Italy

Payment for goods or services with virtual currency entails the obligation to notify the supervisory authorities of the operations in Italy. Back in 2015, the Financial Intelligence Unit (UIF - Unità di informazione finanziaria), was created under the Central Bank of Italy with full operational and managerial autonomy — it notified of the risks of money laundering, and the financing of terrorism. The supervisor’s opinion was then presented in a circular letter entitled "Abnormal use of virtual currencies.''

In May 2019, the Financial Intelligence Unit issued a new guidance document containing detailed explanations on how to account for suspicious transactions with the abnormal use of cryptocurrencies and to signal them.

The document refers to the Italian anti money laundering law decree No. 90 of May 25, 2017, that dealt with the provision of services related to the use of virtual currencies, the recipients of which are subject to mandatory notification of authorities. The document addressed the “activities for the conversion of virtual currencies into currencies with a forced exchange rate.”

As a next step, the fifth directive (EU Directive No. 2018/843) will be incorporated into Italian national legislation. It also defines providers of digital portfolio services and services for “protecting private cryptographic keys on behalf of its customers to store, keep and transfer virtual currencies” as binding parties.

Objectively, this measure recommends that maximum attention should be paid to the alleged anomalous creation of reserves used to purchase virtual assets (the term used by the FATF to denote virtual currency) by:

• replenishment of prepaid cards issued in cash or online, including in fractional form;
• accreditation for transfers, including foreign ones;
• multiple payments — individually insignificant amounts, but constituting a significant amount in total.

The Financial Intelligence Unit considers it necessary to evaluate the entities involved in operations with virtual currencies. Subjects related to persons under criminal prosecution or preventive measures, living in high-risk third countries, conducting operations in terrorist activity zones, or having artificially created or opaque structures that make it difficult to identify the beneficial owner, automatically fall into the supervision of authorities.

The document notes that just one repetition of the above operations is not enough to qualify them as suspicious. In each case, the need for an in-depth and cross-sectional analysis of all available information remains.