On 6 March 2025, in response to a call for advice from the European Commission in relation to certain aspects of the new EU Anti Money Laundering (AML)/Countering Terrorist Financing (CFT) regime, the European Banking Authority (EBA) published a consultation paper containing four sets of draft Regulatory Technical Standards (RTS).
The draft RTS related to:
- how the new EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will decide which institutions will be subject to direct supervision
- determining the Money Laundering/Terrorist Financing (ML/TF) risk associated with each institution
- information to be obtained as part of the customer due diligence (CDD) process
- indicators and criteria to be considered when setting the level of pecuniary sanctions or taking administrative measures, including developing a methodology on how to impose periodic penalty payments.
Please see our article here for further information on the EU AML/CFT reform package, the EBA website here for further information on the AML/CFT consultation, and EUR-Lex here for the AML Regulation.
The AML Regulation
The AML Regulation (Regulation (EU) 2024/1624) will come into force on 10 July 2027 and will introduce new and harmonised requirements for identifying and verifying beneficial owners, which will particularly affect complex ownership structures. These changes have arisen due to the differing degrees of transparency imposed by Member States and the inconsistent approach to the calculation of indirect ownership of a legal entity or arrangement.
The AML Regulation sets out rules to identify the beneficial owners and the type of information required to identify and verify the beneficial owners of legal entities, express trusts or similar legal arrangements. Under the new regime, obliged entities will have to provide more detailed information on beneficial ownership and ensure that beneficial ownership registers are up-to-date and accurate. Obliged entities operating in more than one jurisdiction in the EU will need to ensure their AML/CFT compliance arrangements are aligned across member states.
Key changes to beneficial ownership under the new EU AML/CFT regime to improve the consistency of identification of beneficial owners, thereby increasing transparency, include the following:
Beneficial Ownership through ownership interest
Whilst the definition of "beneficial ownership" is unchanged (beneficial owners are those natural persons who have a direct shareholding of 25% plus one share or an indirect ownership interest of more than 25% in the entity), the AML Regulation now provides for the calculation of indirect ownership by multiplying the shares or voting rights or other ownership interests held by intermediate entities in the chain of entities in which the beneficial owner holds shares or vetoing rights and adding those results together. This will ensure that all relevant ownership interests will be identified.
Further, the European Commission can lower the beneficial ownership threshold to 15% (or lower) for corporate entities deemed as high-risk for money laundering and terrorist financing.
Beneficial ownership through control
"Control of the legal entity" means the possibility to exercise, directly or indirectly, significant influence and impose relevant decisions within the legal entity.
The AML Regulation introduces a new definition of "control through an ownership interest of a corporate entity", which means that direct or indirect ownership of 50% plus one of the shares or voting rights or other ownership interest in the corporate entity will constitute "control".
Other forms of "control" are also provided for such as (i) the right to appoint or remove members of the board, management or similar officers of the legal entity, (ii) the exercise of veto rights or decision rights attaching to shares of the corporate entity; and (iii) decisions regarding the distribution of profits of the legal entity.
Stricter Beneficial Ownership Identification & Verification Requirements
In terms of verification of beneficial owners, the AML Regulation provides that the identification of beneficial owners must be verified before the establishment of a business relationship or the carrying out of an occasional transaction by reference to numerous sources (and not just on the basis of a risk-based approach).
Obliged entities will have to verify information on beneficial owners using identification documents, electronic identification (under the eIDAS Regulation), or "reasonable measures" to collect data from customers or reliable sources. Using the central register for these purposes is not sufficient; the central register should be used for cross-checking rather than as the primary source of verification.
The draft RTS on CDD set out further detail on "reasonable measures", which include:
- consulting public registers (not central registers) and other reliable national systems, such as residence, tax, passport, and land registers;
- gathering information from third-party sources, such as utility bills, up-to-date information from credit or financial institutions, and documents from legal entities where the beneficial owner is named and certified by an independent professional.
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.
