Anti-money laundering


The Fourth Anti-Money Laundering Directive (Directive 2015/849) constitutes the main EU legal instrument in the prevention of use of the financial system for the purposes of money laundering and terrorist financing. It provides that “obliged entities” shall apply customer due diligence requirements when entering into a business relationship. The scope of the Directive covers, among others financial institutions, insurance intermediaries as defined in the Insurance Mediation Directive (IMD) when they “act with respect to life insurance and other investment-related services, with the exception of a tied insurance intermediary”.

In June 2018, a Directive amending the Fourth AMLD, the so-called Fifth AMLD, was published in the EU Official Journal, which The Commission had proposed these additional AML rules in the wake of terrorist attacks and the Panama Papers revelations in 2016. The Fifth AMLD (Directive 2018/843) complements the existing EU legal framework by setting out additional measures to better counter the financing of terrorism and to ensure increased transparency of financial transactions. The Commission had proposed these additional AML rules in the wake of terrorist attacks and the Panama Papers revelations in 2016 (see also our Annual Report 2018).

In December 2018, the Council of the EU adopted an Action Plan setting out short term non-legislative actions to better tackle AML challenges. In particular, the Council recommended that a "post-mortem" analysis of recent money laundering cases in EU banks be carried out to understand how they came about and to help shape possible additional actions.

In the context of its proposal on the ESAs Review, the European Commission adopted targeted amendments with a view to ensuring that AML/CTF rules are effectively supervised across the EU and that different competent authorities cooperate closely with each other. Under this reform, which was adopted by the EU legislators in April 2018, the powers related to the prevention and mitigation of risks posed to the financial sector by money laundering and terrorist financing activities are now centralised for all financial institutions at the European Banking Authority -EBA- (see also our Annual Report 2019).

Publication & Transposition of AMLD

Member States are due to transpose the Fifth AML Directive into national law by 10 January 2020. In May 2020, the European Commission initiated infringement procedures in the form of formal notice against Belgium, Czechia, Estonia, Ireland, Greece, Luxembourg, Austria, Poland and the UK for having only partially transposed the Fifth AMLD. The Commission had previously in February 2020 also addressed letters of formal notice to Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia, Spain and Estonia because these Member States had not communicated any transposition measures. Furthermore, the Commission sent a reasoned opinion to Austria and the Netherlands and a letter of formal notice to Czechia, Hungary, Italy, Slovenia, Sweden, and the United Kingdom for failing to completely transpose the Fourth AMLD. The Member States concerned have two months to respond and take the relevant action; otherwise, the Commission may pursue the next infringement steps.

Commission Action Plan on AML

According to the European Commission, the fight against money laundering and terrorist financing is instrumental to ensuring financial stability and security in Europe. Recent money laundering scandals have revealed the need for stricter rules at EU level. Legislative gaps occurring in one Member State have an impact on the EU as a whole. That is why EU rules should be implemented and supervised efficiently in order to combat crime and protect the EU financial system.

On 7 May 2020, the new von der Leyen Commission published a six-point Action Plan to further strengthen the EU's fight against money laundering and terrorist financing. The Action Plan sets out concrete measures that the Commission will take over the next 12 months to enforce, supervise and coordinate the EU's rules on AML/CTF. It builds on the following: 1. Effective implementation of existing rules, 2) a single EU rulebook, 3) a EU-level supervisor, 4) a coordination and support mechanism for national Financial Intelligence Units, 5) enforcing EU-level criminal law provisions and information exchange, and 6) the EU's global role.

Together with the Action Plan, the Commission has also adopted a new list of third countries with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks. The listing does not entail any type of sanctions or restrictions on trade relations, but requires obliged entities to take enhanced due diligence measures on transactions involving these countries. This includes obtaining additional information on the customer and on the beneficial owner or obtaining the approval of senior management for establishing a business relationship. The Commission amended the list in the form of a Delegated Regulation. It will now be submitted to the European Parliament and Council of the EU for approval within one month. Given the Coronavirus crisis, the Regulation listing third countries – and therefore applying new protective measures – will only start to apply as of 1 October 2020.

Finally, the Commission published a methodology to identify high-risk third countries that have strategic deficiencies in their anti-money laundering and countering terrorist financing regimes that pose significant threats to the EU's financial system. The aim of this methodology is to provide more clarity and transparency in the process of identifying these third countries.

The Commission launched a public consultation on the Action Plan to fight against money laundering and terrorist financing which will run until 29 July 2020. BIPAR has launched an internal consultation amongst its member-associations and based on the feedback collected it will submit its contribution to the Commission.

EBA Consultation on customer due diligence and ML/TF risk factors

In February 2020, the European Banking Authority (EBA) published a consultation on its draft Guidelines on money laundering and terrorist financing (ML/TF) risk factors. These Guidelines will amend the 2017 EBA risks factors Guidelines. They set out factors that financial institutions, including insurers, insurance and financial intermediaries, should consider when assessing the ML/TF risks associated with a business relationship or transaction. Measures for enhanced and simplified customer due diligence are also proposed. Guidelines 14 and 15 are particularly addressed to life insurers and investment firms. The consultation is open until 6 July 2020.BIPAR has launched an internal consultation amongst its member-associations and based on the feedback collected it will submit its contribution to the Commission (post-mortem analysis).

Other AML initiatives

On 24 July 2019, the Juncker Commission adopted a Communication and four reports that aimed at supporing European and national authorities in better addressing ML/TF risks. The reports stress the need for full implementation of AML/CTF rules while underlining that a number of structural shortcomings in the implementation of the Union's anti-money laundering and counter terrorist financing rules still need to be addressed. Following the request from the Council in December 2018, the European Commission has analysed in one of the reports ten recent publicly known cases of money laundering in EU banks to provide an analysis of some of the current shortcomings and outline a possible way forward.

Furthermore, EBA adopted in July 2019 an Opinion highlighting the importance of money laundering and terrorist financing risks in the prudential supervision. Prudential supervisors are required to take into account AML/CTF information in the context of authorisation, ongoing supervision, supervisory review and in the context taking administrative measures. On the other hand, AML/CFT supervisors will use the information from prudential supervisors to inform their approach to the AML/CFT supervision of institutions. The management body of the institutions should be adequately skilled to identify, assess and manage such risks.

- Published in June 2020 -

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