IN FULL: Europe’s new AML Regulation and Directive revealed – and how they affect you
By AML Intelligence Correspondent
THE FULL text of Europe’s new AML Regulation and Directive were published this week.
It follows the agreement reached last month between the European Council and Parliament on parts of the AML package that aims to protect EU citizens and the EU’s financial system against money laundering and terrorist financing.
With the new package, all rules applying to the private sector will be transferred to a new regulation, while the directive will deal with the organisation of institutional AML/CFT systems at national level in the member states.
“The provisional agreement on an AML regulation will, for the first time, exhaustively harmonise rules throughout the EU, closing possible loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system,” the Commission said in a statement.
“The agreement on the directive will improve the organisation of national AML systems,” it added.
ANNOUNCEMENT: Eurogroup President Paschal Donohoe will officially open ‘European Anti-Financial Crime Summit 2024’ on May 16 joining a stellar line-up of speakers from across the EU, UK and US who will discuss the most topical issues facing Chief Compliance Officers, #MLROs, #FCC and #AFC teams in Banking, Fintech, FSIs and Gaming.
Book your place now and avail of the Early Bird Rates. (Prices increase next week)
Here we summarise the main points of the new laws.
The AML Regulation:
Obliged entities
Obliged entities, such as financial institutions, banks, real estate agencies, asset management services, casinos, merchants – play a central role as gatekeepers in the anti-money laundering and countering the financing of terrorism (AML/CTF) framework as they have a privileged position to detect suspicious activities.
The provisional agreement expands the list of obliged entities to new bodies. The new rules will cover most of the crypto sector, forcing all crypto-asset service providers (CASPs) to conduct due diligence on their customers. This means that they will have to verify facts and information about their customers, as well as report suspicious activity.
According to the agreement, #CASPs will need to apply customer due diligence measures when carrying out transactions amounting to €1000 or more. It adds measures to mitigate risks in relation to transactions with self-hosted wallets.
Other sectors concerned by customer due diligence and reporting obligations will be traders of luxury goods such as precious metals, precious stones, jewellers, horologists and goldsmiths. Traders of luxury cars, airplanes and yachts as well as cultural goods (like artworks) will also become obliged entities.
The provisional agreement recognises that the football sector represents a high risk and expands the list of obliged entities to professional football clubs and agents. However, as the sector and its risk is subject to wide variations, member states will have the flexibility to remove them from the list if they represent a low risk. The rules will apply after a longer transition period, kicking in 5 years after entry into force, as opposed to 3 years for the other obliged entities. Enhanced due diligence
The Council and Parliament also introduced specific enhanced due diligence measures for cross-border correspondent relationships for crypto-asset service providers.
The Council and Parliament agreed that credit and financial institutions will undertake enhanced due diligence measures when business relationships with very wealthy (high net-worth) individuals involve the handling of a large amount of assets. The failure to do so will be considered an aggravating factor in the sanctioning regime.
Cash payments
An EU-wide maximum limit of €10 000 is set for cash payments, which will make it harder for criminals to launder dirty money. Member states will have the flexibility to impose a lower maximum limit if they wish.
In addition, according to the provisional agreement, obliged entities will need to identify and verify the identity of a person who carries out an occasional transaction in cash between €3 000 and €10 000. Beneficial ownership
The provisional agreement makes the rules on beneficial ownership more harmonised and transparent. Beneficial ownership refers to persons who actually control or enjoy the benefits of ownership of a legal entity (like a company, foundation or trust), although the title or property is in another name.
The agreement clarifies that beneficial ownership is based on two components – ownership and control – which both need to be analysed to identify all the beneficial owners of that legal entity or across types of entities, including non-EU entities when they do business in the #EU or purchase real estate in the EU. The agreement sets the beneficial ownership threshold at 25%.
Related rules applicable to multi-layered ownership and control structures are also clarified to make sure hiding behind multiple layers of ownership of companies won’t work anymore. In parallel, data protection and record retention provisions are clarified to make the work of the competent authorities easier and faster.
The agreement provides for the registration of the beneficial ownership of all foreign entities that own real estate with retroactivity until 1 January 2014. High-risk third countries
Obliged entities will be required to apply enhanced due diligence measures to occasional transactions and business relationships involving high-risk third countries whose shortcomings in their national anti-money laundering and counter-terrorism regimes make them represent a threat to the integrity of the EU’s internal market.
Recommended by LinkedIn
The Commission will make an assessment of the risk, based on the financial action task force listings (FATF, the international standard setter in anti-money laundering). Furthermore, the high level of risk will justify the application of additional specific EU or national countermeasures, whether at the level of obliged entities or by the member states.
The AML Directive:
Beneficial ownership registers
According to the provisional agreement the information submitted to the central register will need to be verified. Entities or arrangements that are associated with persons or entities subject to targeted financial sanctions will need to be flagged.
The directive grants the entities in charge of the registers 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 agreement also establishes that in addition to supervisory and public authorities and obliged entities, among others, persons of the public with legitimate interest, including press and civil society, may access the registers.
In order to facilitate investigations into criminal schemes involving real estate, the text ensures that real estate registers are accessible to competent authorities through a single access point, making available for example information on price, property type, history and encumbrances like mortgages, judicial restrictions and property rights.
The four main Plenary sessions at The European Anti-Financial Crime Summit 2024 will discuss:
- The Effect of Europe’s new AML regulations and the Impact of AMLA
- Understanding the Role of AI & Machine Learning in Detecting FinCrime; the Impact on Data Privacy
- Public Private Partnerships in Fighting Financial Crime
- Sanctions – Staying Ahead and Best Practice
Book your place now and avail of the Early Bird Rates. (Prices increase next week)
Responsibilities of FIUs
Each member state has already established financial intelligence unit (FIU) to prevent, report and combat money laundering and terrorist financing. These #FIUs are responsible for receiving and analysing information relevant to money laundering and terrorist financing, notably in the form of reports from obliged entities.
According to the agreement, FIUs will have immediate 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, customs data, and national weapons and arms registers, among others.
FIUs continue to disseminate information to competent authorities tasked with combatting money laundering and terrorist financing, including authorities with an investigative, prosecutorial or judicial role. In cross border cases, FIUs will cooperate more closely with their counterparts in the member state concerned with the suspicious activity report. The FIU.net system will be upgraded to enable the fast dissemination of cross-border reports.
According to the provisional agreement, applying fundamental rights is confirmed as an integral part of the FIU’s work and taken into account when making decisions.
The agreement sets out a firm framework for 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 to allow for the adoption of appropriate measures.
Supervisors
According to the agreement, each member state will ensure that all obliged entities established in its territory are subject to adequate and effective supervision by one or more supervisors. Supervisors will apply a risk-based approach.
Supervisors will report to the FIUs instances of suspicions. Similar to provisions in the AMLA regulation, new supervisory measures for the non-financial sector, so-called supervisory colleges, are introduced. AMLA will develop draft regulatory technical standards defining the general conditions that enable the proper functioning of AML/CFT supervisory colleges. Risk assessment
According to the provisional agreement, both EU and national risks assessments remain an important tool. The Commission will conduct an assessment at EU level of the risks of money laundering and terrorist financing and draw up recommendations to member states on measures that they should follow. Member states will also carry out risk assessments at national level and commit to effectively mitigating the risks identified in the national risk assessment.
Next steps
Announcing the new text, Vincent Van Peteghem , Belgium’s Minister of Finance on behalf of the Council said: “This agreement is part and parcel of the EU’s new anti-money laundering system. It will improve the way national systems against money laundering and terrorist financing are organised and work together.
“This will ensure that fraudsters, organised crime and terrorists will have no space left for legitimising their proceeds through the financial system.”
The texts will now be finalised and presented to member states’ representatives in the Committee of permanent representatives and the European Parliament for approval. If approved, the Council and the Parliament will have to formally adopt the texts before they are published in the EU’s Official Journal and enter into force.
AML Intelligence is the fastest growing global business site for AML and Compliance professionals. We are committed to delivering quality reporting, analysis and data on money laundering and anti-terrorist financing.
Individuals can subscribe at our special introductory rate here.
--
1yWe are witnessing an ongoing race between criminal elements and regulatory authorities to contain threats to the stability of the financial system. This threat will continue to grow due to the international political situation, open hostilities and attempts by the international community to deter them through peaceful means. For this, it is necessary to unite all the forces in the world who want to save the planet Earth with reason, care for the future, the prosperity of humanity.
Finance and Accounting//Operations Management/Banking/Customer Service/Virtual Assistant/Data Analyst
1yGood article there, Do you offer AML Compliance solutions in relation to transaction monitoring alerts to institutions?
CEO / Founder (FBI ret.) - ARC Lite Innovations- RegTech Counter Fraud & Risk SME - Financial Services & Healthcare
1yGood headway made here but the AML industry needs to better identify the bad guys. Otherwise it’s just a different scheme by a repeat offender. (One of Cyber’s biggest weaknesses.) Identity Validation (IDV) “ground truth” is possible — objectively identitying (beyond the standard of government issued IDs) the actor(s) behind every regulated transaction, effectively and efficiently.
Group Chief Anti Financial Crime Officer | Executive Vice President & MD | MBA | ACAMS Italy Chapter Founding Board Member | ACORA Board Member | Bain & Co Alumnus
1yAlessandra Gotti Gervasio Cicoria