European Union: Fourth Money Laundering Directive IV

Last Updated: 7 July 2015
Article by Karina Mulkerrins and Valerie Bowens

Most Read Contributor in Ireland, July 2017

 On 5 June 2015, the Fourth Money Laundering Directive (Directive (EU) 2015/849) ("MLD4") was published in the Official Journal of the EU. MLD4 extends and replaces the Third Money Laundering Directive ("MLD3"), which is the existing EU anti-money laundering ("AML") and counter terrorist financing ("CTF") regime.

Member States are obliged to transpose MLD4 into national law by 26 June 2017.


The introduction of MLD4 is largely driven by revisions to the FATF Recommendations which were adopted in February 2012 in order to address emerging AML and CTF concerns. The European Commission (the "EC") also published a report in 2012, which reviewed MLD3.

Consequently, the first draft of MLD4 was published in February 2013 and political agreement was reached at the end of 2014. MLD4 was published in the Official Journal following adoption by the EU Council in April 2015 and by the European Parliament in May 2015. MLD4 is designed to strengthen the EU's defences against money laundering and terrorist financing.

In this briefing, we propose to outline some of the important aspects of MLD4, namely, the risk-based approach, beneficial ownership, the scope of customer due diligence requirements, politically exposed persons ("PEPs"), reliance on third parties, enforcement, as well as the next steps involved.

Significant Changes

Certain significant changes introduced by MLD4 are outlined below.

(i) Risk-Based Approach

MLD4 places a greater emphasis on utilising the risk-based approach as a mechanism to identify and lessen the risks associated with money laundering and terrorist financing. Risk assessments must be undertaken at EU level, by Member States and also by entities falling within the scope of MLD4, i.e., those listed in Article 2(1) of MLD4 ("Obliged Entities").

From an EU perspective, the EC's risk assessment must address cross-border threats that could affect the internal market, while that of the European Supervisory Authorities ("ESAs") should focus on the risks affecting the financial sector. Risk assessments carried out at national level by Member States, as well as by Obliged Entities, must focus on the risks that affect each of them specifically. The objective of the risk assessment is to identify, understand and mitigate the risk of money laundering and terrorist financing. Obliged Entities are also required to implement policies, controls and procedures in order to manage and mitigate the associated risks.

MLD4 removes the exemptions from Customer Due Diligence ("CDD") requirements in respect of certain entities (e.g. where firms are credit or financial institutions or listed companies whose securities are admitted to trading on a regulated market). Accordingly, Obliged Entities will have to carry out their own risk assessment to determine if simplified CDD is appropriate and engage in adequate monitoring to enable the detection of suspicious transactions.

(ii) Beneficial Ownership

MLD4 requires that Member States ensure that entities incorporated in their jurisdictions hold adequate, accurate and current information regarding their beneficial ownership. This information must be stored on a central register which can be accessed by competent authorities and EU Financial Intelligence Units ("FIUs"), Obliged Entities and others that can demonstrate a legitimate interest.

MLD4 also provides clarity around "indirect ownership" and introduces some new rules in respect of the beneficial ownership of trusts, including details of the beneficial interest held. For example, Member States are obliged to require trustees of any express trust to obtain and hold adequate and up-to-date information on beneficial ownership regarding the trust. MLD4 states that, when the trust gives rise to tax consequences, Member States must ensure that the beneficial ownership information held by trustees is held on a central register. Trustees must also provide beneficial ownership information to Obliged Entities in a timely manner, in accordance with CDD framework requirements.

(iii) Scope of Customer Due Diligence Requirements

MLD4 has a wider scope than MLD3 and therefore expands the circumstances in which CDD should be carried out by Obliged Entities, to include the following:

  • Occasional cash transactions amounting to €10,000 or more in the case of persons trading in goods, i.e., persons trading in goods to the extent that they make or receive cash payments of €10,000 or more will be obliged to conduct CDD (whether the transaction is carried out in a single operation or in several operations which appear to be linked);
  • Single transactions of €2,000 or more for providers of gambling services, i.e., providers of gambling services will be obliged to conduct CDD for single transactions, upon the collection of winnings, the wagering of a stake, or both, when carrying out transactions amounting to €2,000 or more (whether the transaction is carried out in a single operation or in several operations which appear to be linked). However, in proven low-risk circumstances Member States may discharge some gambling services from certain obligations under MLD4; and
  • In addition, the scope of the exemption in respect of CDD for electronic money has become more strict in the case of rechargeable devices.

(iv) PEPs

MLD4 clarifies the definition of a PEP and widens the categories of individuals who can be regarded as PEPs to include members of the governing bodies of political parties, and directors, deputy directors and members of the board or equivalent function of an international organisation.

The rules relating to PEPs are also extended to cover domestic PEPs. MLD4 requires that, when a person ceases to be a PEP, an Obliged Entity must consider the continuing risk imposed by that person for at least twelve months. Risk-sensitive measures must be applied until that person is deemed to pose no further risk specific to PEPs. Furthermore, Obliged Entities are not entitled to rely exclusively on PEP lists, they are responsible for making their own determination as to whether a customer is a PEP, or associated with a PEP.

(vi) Reliance on Third Parties

MLD4 will continue to allow Obliged Entities to rely on third parties for CDD requirements in order to ease the burden of compliance. Similarly, third parties that are situated in a non-EU Member State must apply equivalent CDD and record keeping requirements to those in MLD4. It will need to be ensured that reliance on third parties meets the obligations imposed by MLD4 as certain requirements in this regard have been amended.

As with MLD3, MLD4 explicitly prohibits Obliged Entities from relying on third parties established in high-risk countries. However, MLD4 provides that Member States may exempt branches and majority owned subsidiaries from this prohibition where they fully comply with group-wide policies and procedures.

MLD4 sets out that the onus lies with the Obliged Entity to ensure that it is provided with the required CDD information from the third party and that adequate steps are taken to ensure that the third party provides immediately, upon request, the relevant documentation regarding the customer's identity.

(vii) Enforcement

MLD4 places greater emphasis on enforcement and sanctions and sets out detailed provisions as to the type of administrative sanctions and measures that, at a minimum, should be implemented by Member States. Sanctions under MLD4 include pecuniary and non-pecuniary sanctions. A maximum administrative pecuniary sanction of at least twice the amount of the benefit derived from the breach (where that benefit can be determined) or at least €1,000,000 may be imposed. In respect of credit institutions and financial institutions, a maximum administrative pecuniary sanction of at least €5,000,000 or 10% of total annual turnover in the case of a legal person, and at least €5,000,000 in the case of a natural person may be imposed.

Next Steps

MLD4 provides that the ESAs, through their Joint Committee must publish guidelines on the risks of money laundering and terrorist financing affecting the EU financial sector. MLD4 also makes provision for the publication of delegated acts and technical standards by the European Commission. As outlined above, Member States must bring into force the laws, regulations and administrative provisions to comply with MLD4 by 26 June 2017. It should also be borne in mind that Member States may impose more stringent obligations than those outlined in the directive itself. Firms must now start preparing for compliance with the new rules and will need to consider the effect that MLD4 may have on their business.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.