On 5 June 2015, the Fourth Money Laundering Directive (MLD4) was published in the Official Journal (see our previous Client Briefing for further information). Member States were given until 26 June 2017 to transpose MLD4 into national law.
On 5 July 2016, the European Commission adopted a proposal to amend MLD4. Key aspects of that proposal were as follows:
The transposition deadline for MLD4 will be brought forward, by almost 7 months, to 1 January 2017.
In light of the Panama Papers scandal, the Commission intends to improve the transparency of information on beneficial ownership.
It proposes that public access be granted to information on the beneficial ownership of companies and trusts engaged in business activities. Information on other trusts will be available to those with a legitimate interest. The threshold for the information being publicly available remains >25% ownership of a company, save in the case of companies that present a real risk of being used for money laundering and tax evasion, in which case the threshold is reduced to 10%.
Virtual currency exchanges
Virtual currency exchange platforms and custodian wallet providers will be brought into scope in light of the Commission's concerns that dealings in virtual currencies involve a higher level of anonymity. Those exchanges will now have to apply customer due diligence (CDD) when exchanging virtual currencies for real currencies, and report suspicious transactions.
Anonymous pre-paid cards
The use of anonymous prepaid cards will be minimised by:
- reducing the threshold for non-reloadable pre-paid payment instruments to which CDD obligations apply from €250 to €150;
- ensuring that cards issued outside the EU may only be used in the EU when they are regarded as compliant with requirements equivalent to the EU's requirements; and
- expanding CDD requirements,
while recognising that these cards provide a useful social purpose and can be beneficial for those who are financially excluded, or economically vulnerable.
Financial Intelligence Units and Competent Authorities
Further powers will be given to Financial Intelligence Units (FIUs) to request information from obliged entities and to have direct access to information held by them.
Member States will be required to set up automated centralised mechanisms to enable FIUs and competent authorities to quickly identify account-holders (there is some flexibility around what type of centralised mechanism each Member State may use).
Steps will also be taken to promote the interconnection of national registers to assist cooperation between Member States.
High-risk third countries
The Commission intends to harmonise the approach taken by Member States to in relation to enhanced CDD measures for high-risk third countries. As part of its proposal, the Commission will publish a delegated regulation listing those countries in the Official Journal, and expects to update that list three times per year to reflect international developments. On 14 July 2016, it published the draft of that Delegated Regulation and accompanying Annex.
The Commission's proposal has now been forwarded to the European Parliament and the EU Council for consideration. Firms that were already working towards a June 2017 transposition deadline for MLD4 should now start considering how an earlier transposition date will affect that work.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.