Anti-money laundering

The Fourth Anti-Money Laundering Directive (AMLD 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 Fourth AMLD had to be transposed into national law by the EU Member States by 26 June 2017. According to the latest Commission's update, there are currently open infringement procedures against 20 Member States in relation to their non-transposition of the latest EU Anti-Money Laundering rules.

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”.

On 5 July 2016 the Commission presented a new proposal for a Directive amending the Fourth AMLD (the so-called Fifth Anti-Money Laundering Directive) in the wake of terrorist attacks and the Panama Papers revelations. It complements the existing EU legal framework by setting out additional measures to further counter the financing of terrorism and to ensure increased transparency of financial transactions.

The objectives of the Fifth Anti-Money Laundering Directive are to:

• Increase transparency on who really owns companies and trusts by establishing beneficial ownership registers;
• Prevent risks associated with the use of virtual currencies and prepaid cards;
• Improve the level of safeguards for financial flows to and from high-risk third countries;
• Enhance the power of Financial Intelligence Units (FIUs) and facilitate their cooperation;
• Ensure centralised national bank and payment account registers or central data retrieval systems in all Member States.

The main changes the Fifth Anti-Money Laundering Directive brings about are:

• Extension of the scope to include entities in charge of holding, storing or transferring virtual currencies, persons providing tax related services and persons trading in works of art;
• Public access to the beneficial ownership registers for companies; access on the basis of legitimate interest to the data of the beneficial owner of trusts and similar legal arrangements; public access upon written request to this information on trusts that are the beneficial owner of a company not incorporated in the EU;
• Lower threshold for identifying the holders of prepaid cards (from €250 to €150) and widening of customer verification requirements for payments on site. Virtual currency exchange platforms and custodian wallet providers will have to apply customer due diligence controls, ending the anonymity associated with such exchanges;
• Access to more information for FIUs through centralised bank and payment account registers, enabling them to identify account holders;
• Improved checks on risky third countries. The Commission has established and regularly updates a harmonised list of non-EU countries with deficiencies in their anti-money laundering prevention regimes. Additional due diligence measures will be required for financial flows from these countries.

Following the agreement between the two EU co-legislators, the European Parliament and the Council of the EU, the amended Directive was published in the Official Journal of the EU in 2018 and is due to be transposed at national level by January 2020. (update on 4.01.2019)

ESAs Review and Anti-money Laundering

The European Commission adopted targeted amendments to its proposal to the ESAs review (EBA, EIOPA, ESMA), with a view to ensuring that Anti-Money Laundering/Countering Terrorist Financing (AML/CTF) rules are effectively supervised across the EU and that different competent authorities cooperate closely with each other.

EBA will now have the following tasks in relation to AML:

• Collecting information from national competent authorities relating to material weaknesses identified in the context.
• Maintaining a centralised database.
• Enhancing the quality of supervision through the development of common regulatory and supervisory standards and coordination among national supervisory authorities.
• Performing risk assessments on competent authorities.
• Requesting competent authorities to investigate possible breaches of Union law, and where necessary to consider imposing sanctions. (update on 4.01.2019)