The European Parliament vote on the final text of the fourth AML Directive ("the Fourth AMLD") is imminent.
The draft Fourth AMLD is based on the revised FATF recommendations (February 2012), but goes beyond. The current European legislation, known as the 'Third Anti-Money Laundering Directive', has been in force since 2005 and applies to banks and the entire financial sector as well as, among others, to lawyers, notaries, accountants, real estate agents, company service providers and all dealers in goods, when payments are made in cash in excess of EUR 15,000 ("the Obliged Professionals").
The following key changes are foreseeable:
- Inclusion of tax crimes is to become mandatory in the scope of national AML legislation. However, this will not entail any change in Luxembourg, as tax crimes are not likely to be defined as predicate offences: the aggravated tax fraud (l'escroquerie fiscale) is not specifically listed in article 506-1 of the Criminal code and the minimum sanction (imprisonment of at least one month) does not meet the criteria provided for by the same article 506-1);
- A greater emphasis is placed on a risk-based approach to better target money laundering. In Luxembourg, as far as the financial sector is concerned, a number of the related rules have already been anticipated by the CSSF regulation No. 12-02;
- The threshold for a single value cash transaction is to be reduced from EUR 15,000 to EUR 10,000, for high value goods dealers or service providers;
- Due diligence provisions regarding politically exposed persons ("PEPs") are to be extended to cover domestic PEPs (e.g. MPs, judges) who will be treated in the same way as foreign PEPs, meaning that they will be considered high risk from a due diligence perspective and additional measures will have to be followed to establish the source of their wealth and funds;
- Beneficial owners of companies are to be listed in centralised and interconnected registers in the European Union, accessible to the competent authorities, Obliged Professionals and also any person who can demonstrate a "legitimate interest" in suspected money laundering (it is not yet clear who such persons might be).
The initial draft of the Fourth AMLD (as proposed by the European Commission) required the Member States to ensure that corporate and other legal entities obtain and hold adequate, accurate and current information on their beneficial ownership and that this information is provided to Obliged Professionals when the latter are taking customer due diligence measures and is made available to competent authorities (regulators) and Financial Intelligence Units.
The European Parliament advocated for the registers of beneficial owners to become publicly available. With a view to enhancing transparency, beneficial ownership information should be recorded in specified locations (e.g. in the case of companies in a public central company registry). Currently professionals lack ways and means to verify the beneficial owners, which represents a disproportionate burden and liability for Obliged Professionals. Therefore the data gathered by businesses in Member States should be improved to include beneficial ownership information that would help both authorities and professionals to verify if criminals try to conceal their crimes behind companies.
Given the cross-border scope of business and the interconnectivity of the internal market, those registers should also be interconnected and accessible by the authorities and the Obliged Professionals throughout Europe. For the sake of data protection, Member States may grant access to the information to other parties and establish rules based on which the register can be accessed.
Last Autumn, negotiations were held between the European Council, the European Commission and the European Parliament. The deal concluded on December 2014 was endorsed by both the Economic and Monetary Affairs and Civil Liberties committees of the European Parliament in Brussels in January 2015.
The agreed compromise text states that the ultimate owners of companies will have to be listed in central registers in the European Union, accessible to the competent authorities and their Financial Intelligence Units (without any restriction), to Obliged Professionals, and also to any persons or organisations that can demonstrate a "legitimate interest", such as investigative journalists. The aim is welcome, but these new rules will be very challenging for the fund industry in Luxembourg.
The final full European Parliament vote is likely to be held in April 2015 and is now anticipated to be a mere formality.
The European Union Member States will have up to two years from the date of adoption to implement the Fourth AMLD into their national legislation.
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