After almost a year of wrangling, the EU Council and the
European Parliament have finally reached an agreement on a new
Anti-Money Laundering Directive.
The 4th AML Directive expands the scope of its predecessor (which
was adopted in 2005, before the global banking scandals and the
push towards tax transparency) in a number of respects.
In particular, the new directive requires EU Member States to
maintain central registers containing information about the
Ultimate Beneficial Owners ('UBOs') of companies, as well
as other legal entities.
These central registers will be accessible to the authorities with
no restrictions; to the responsible parties; and to anyone showing
a 'legitimate interest' in relation to money laundering,
terrorism financing and associated offences, like corruption, fraud
and tax crimes. A press release issued by the EU suggests that this
will include eg investigative journalists.
The publication of details concerning the beneficiaries of trusts
gave rise to an intense debate, as beneficiaries of a trust are in
a very different position than, say, shareholders of a company. In
many circumstances, beneficiaries are not aware of their position
and often include minor and vulnerable family members. Accordingly,
after intense lobbying by professional bodies, the final version of
the 4th Money Laundering Directive has limited the circumstances in
which information concerning trusts ought to be published on the
new registers. Furthermore, only trusts governed by the national
law of a EU Member State will be under an obligation to disclose
the relevant information, and only where taxes are involved.
However, a potential pitfall relates to those trusts that own a
substantial shareholding in EU companies, etc. In these
circumstances, the company will have to provide details about its
beneficial owners, which means that details about the settlor,
trustee, protector, and the beneficiaries may become public.
The new Directive also clarifies the rules that are applicable to
'politically exposed persons', ie, persons exposed to
higher risks of corruption on the basis of their political role
(eg, Heads of State, Cabinet members, judges of the Supreme Courts,
members of Parliament and their families). In the event of high
risk business relations, adequate measures will have to be taken in
order to establish the source of wealth and the source of funds
used.
EU Member States will have a two-year period to implement the
Anti-Money Laundering Directive in their national legal
systems.
Furthermore, MEPs approved regulatory rules on the transfer of
funds that seeks to facilitate the traceability of payers and
recipients and their property, which will be directly applicable in
every Member State 20 days after publication of the rules within
the EU Official Gazette.
The new EU Money Laundering Directive represents a new step towards
transparency and the introduction of public registers on the
ultimate beneficial ownership of companies and other entities
raises fundamental questions about the right to privacy. Withers
has been following developments in this area very closely and we
are actively advising clients on the impact of transparency, which
includes FATCA, the Common Reporting Standard and, now, the 4th
Money Laundering Directive.
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.