On 18th January 2024, the European Council
(“EC”) and European Parliament (“EP”) reached a
political agreement on the proposed:
- Regulation on the prevention of the use of the financial system
for the purposes of money laundering or terrorist financing
(“AMLR”); and - Directive on the mechanisms to be put in place by the Member
States for the prevention of the use of the financial system for
the purposes of money laundering or terrorist financing
(“AMLD6”).
The AMLR and AMLD6 were part of the European Commission’s
package of legislative proposals to strengthen the EU’s rules
on anti-money laundering and countering the financing of terrorism
(“AML/CFT”), which were presented back on 20 July
2021.
The AMLR will encompass rules and requirements pertaining to the
private sector, i.e., applicable to obliged entities, while the
AMLD6 will include provisions towards the organisation of
institutional AML/CFT systems at the Member States’ national
level. The below are the main salient points pertaining to both the
AMLR and AMLD6.
AMLR
Increase in the list of “obliged
entities”
The list of obliged entities has increased to cover most of the
entities operating within the crypto sphere. All crypto asset
service providers will therefore be required to undertake due
diligence on their customers when they undertake a transaction
amounting to €1,000 or more. Measures to be adopted in
relation to self-hosted wallets are also catered for in the
provisional agreement reached.
In addition, traders of luxury goods, including precious metals
and stones, watches, cars airplanes and yachts, as well as
professional football clubs and agents will also be subject to
AML-CFT requirements. With respect to professional football clubs
and agents, the Regulation will provide discretion to each Member
State to determine whether the latter should be deemed as obliged
entities and therefore be subject to AML/CFT requirements,
depending on the level of ML/FT risk they represent.
Enhanced due diligence (“EDD”)
measures
The AMLR will include additional EDD measures for: (i)
crypto-asset service providers when conducting cross-border
correspondent relationships; and (ii) credit and financial
institutions when dealing with a large amount of assets for high
net-worth individuals.
Cash payments
A limit of €10,000 will be set for any cash payments made,
whereby Member States will have the flexibility to even lower this
threshold. Furthermore, obliged entities will be now required to
identify and verify persons carrying out an occasional cash
transaction amounting in between €3,000 and €10,000.
Beneficial ownership
The rules relating to beneficial ownership have been drafted in
a more harmonised and transparent manner. The provisional agreement
clarifies that beneficial ownership concept is based on the notion
of ownership and control, both of which need to be assessed by
obliged entities when identifying and verifying beneficial owners.
In this respect, the beneficial ownership threshold will be set at
25%.
The provisional agreement also sets beneficial ownership rules
relating to non-EU entities when they do business in the EU or
purchase real estate in the EU. The agreement provides for the
registration of the beneficial ownership of all foreign entities
that own real estate with retroactivity until 1 January 2014.
Furthermore, rules relating to multi-layered ownership and
control structures are further clarified to limit the disguise of
beneficial owners behind multiple layers of ownership
structures.
High-risk Third Countries
Obliged entities will be required to apply EDD measures when
undertaking occasional transactions and/or business relationships
having links with high-risk third countries whose AML/CFT
shortcomings pose a threat to the integrity of the EU’s
internal market.
Furthermore, the EC’s assessment of high-risk jurisdictions
will be based upon the listings determined by the Financial Action
Task Force (“FATF”).
AMLD6
Beneficial ownership registers
The AMLD6 will specify certain duties of the entity in charge of
the beneficial ownership register within the Member State,
including, verification of the information submitted to flag any
entities or arrangements having links with sanctioned individuals
or entities. Competent authorities maintaining the register of
beneficial owners in the respective Member States will have the
power to carry out inspections at the premises of legal entities
registered, in case of doubts regarding the accuracy of the
information in their possession.
The AMLD6 also guarantees the access to the beneficial ownership
registers to, amongst others, persons of the public with legitimate
interest, the press and civil society.
Furthermore, real-estate registers should be accessible to
competent authorities via a single access point to facilitate
access for data during property-related criminal
investigations.
Financial Intelligence Units
(“FIUs”)
The AMLD6 will specify the main responsibilities of the FIUs
within Member States which inter alia include prompt and
direct access to financial, administrative and law enforcement
information, including tax information, information on funds and
other assets frozen pursuant to targeted financial sanctions,
information on transfers of funds and crypto-transfers, national
motor vehicles, aircraft and watercraft registers and customs data.
Closer co-operation between the FIU counterparts is expected with
the upgrade of the FIU.net system thereby enabling faster
dissemination of cross-border reports.
Furthermore, the AMLD6 will enable FIUs to suspend or withhold
consent to a transaction, in order to perform its analyses, assess
the suspicion and disseminate the results to the relevant
authorities.
National Supervisors
Each Member State will need to ensure that all obliged entities
established under its laws will be supervised by an adequate and
effective supervisor, which in turn will apply a risk-based
approach supervision and report any ML/FT suspicions to the local
FIU.
Furthermore, new AML/CFT supervisory colleges will be introduced
for the non-financial sector, whereby the general conditions for
the functioning of such colleges will be determined via regulatory
technical standards developed by the Anti-Money Laundering
Authority (“AMLA”).
Risk Assessments
Both the supranational risk assessment (“SNRA”) and
the national risk assessments (“NRA”) remain a
fundamental tool to mitigate ML/FT threats and vulnerabilities
within the EU’s internal market. The European Commission will
continue to draw up the SNRA including recommendations and measures
to Member States, whilst Member States themselves will also draw up
the NRA to assess their exposure to ML/FT threats and
vulnerabilities and effectively mitigate the risks observed.
Moving Forward
The AMLR and AMLD6 will now have to be finalised and presented
to member states’ representatives in the Committee of permanent
representatives and the EP for approval. Once approved, the EC and
the EP will adopt the legislative texts and ultimately will be
published in the Official Journal of the EU and enforced.
Once the relevant texts are finalised and published subject
persons are encouraged to consider the updates included in the
legislative texts, especially the AMLR, to ensure that the adopted
policies, procedures, systems and controls are in line with the
AMLR.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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