Currently Europe is working on the introduction of a digital euro. In June the European Data Protection Board (EDPB) published its response to the European Commission’s targeted consultation on this digital euro. The response also covers the aspects of combating money laundering and terrorist financing (AML/CFT).

EDPB is of the opinion (page 20) that the use of cash shall be safeguarded throughout the EU as a privacy-preserving means of payment. This is as well the reason why the features of a digital euro shall be as close as possible to physical cash.

In regard of AML/CFT compliance cost EDPB comments (pages 21, 22) that the cost will depend on the detailed AML/CFT properties of each of the proposed design options, and:

With regard to transaction monitoring, for example, the EDPB’s proposal is the complete absence of checks (and not only simplified checks) under a certain threshold of low value transactions, as it is the case for the cash today, while higher value transactions would remain subject to standard controls. 

Regarding the risk profile of the digital euro as payment system they say:

The EDPB is of the view that the right balance between data protection and privacy, on one side, and AML/CFT policy objectives, on the other, shall be met. In order to reach this objective, the EDPB proposes the following principle: the introduction of a digital euro shall not alter the AML/CFT risk profile of the current payment system using cash as a widespread means of payment.

Thus, the design of the digital euro shall be crafted in such a way not to make it riskier, nor less risky, than the use of physical cash from an AML/CFT point of view. If riskier, the AML/CFT policy objective would be damaged. If less risky, it would be at the cost of the privacy policy objective. The design of the digital euro would thus benefit to be based on a proper AML/CFT risk assessment study before its introduction.

EDPB is of the opinion that in a right design of the digital euro (pseudonymisation) low-value transactions can be considered as low-risk transactions. If necessary de-pseudonymisation is possible (page 22).

Advanced privacy enhancing techniques are advised. EDPB also comments on the position of intermediaries and the right of the central bank to access personal data. A question on the same right for the new Authority for Countering Money Laundering and Financing of Terrorism (AMLA) was not in the questionnaire.

More information:

• European Data Protection Board (EDPB): response to the European Commission’s targeted consultation on the digital euro
• European Commission: Targeted consultation on the digital euro.
• Consultation feedback by citizens on the proposal with many data protection worries (in have your say request)
• European Banking Federation: EBF response to targeted consultation on the digital euro.
• ECB: publications on the digital euro.

Read the articles on this blog on the digital euro.