Legislation to be amended
- Directive (EU) 2015/849 on preventing the use of the financial system for money laundering or terrorist financing (4AMLD)
- **[Directive 2009/101/EC - consequential changes to the relevant company law rules are required]
Problems arising from the 4AMLD
While Directive (EU) 2015/849 presents a major step forward for the prevention of money laundering and terrorist financing in the EU, recent terrorist attacks and disclosures regarding certain deficiencies in the worldwide financial system ("Panama papers") demonstrate that further steps to improve this framework are needed. In this respect, five problems need to be addressed in relation to the financing of terrorism:
v Unclear and uncoordinated customer due diligence requirements resulting in less efficient monitoring of suspicious transactions involving high risk-third countries;
v Suspicious transactions made through virtual currencies are not sufficiently monitored by the authorities;
v Insufficient measures to mitigate risks associated with anonymous prepaid instruments;
v Limitations in ensuring Financial Intelligence Units' (FIUs) timely access to – and exchange of – information held by obliged entities;
v FIUs lack access, or have delayed access, to information on the identity of holders of bank and payment accounts.
The proposed amendments also address problems linked to lack of access to updated beneficial ownership (BO) information in relation to corporate and legal arrangements.
- 1. Designate virtual currency exchange platforms (and wallet providers) as obliged entities:
Add virtual currency exchange platforms as well as custodian wallet providers to the list of obliged entities. These are the “gatekeepers” allowing the public to have access to the various schemes of virtual currencies. By providing a regulatory framework for the functioning of exchanges, competent authorities will be able to better monitor currency transfers. As obliged entities under the 4AMLD, as financial institutions are, virtual currency exchange platforms (and wallet providers) become subject to the obligation to implement preventive measures and report suspicious transactions.
- 2. Tackle the use of anonymous pre-paid instruments:
The Commission proposes to (i) lower the thresholds (from 250 to 150 EUR) for non-reloadable prepaid payment instruments to which Customer Due Diligence (CDD) measures apply and (ii) suppress the CDD exemption for online use of prepaid cards. This will better serve identification purposes and widen customer verification requirements. Limiting the anonymous use of prepaid instruments will provide a clear disincentive for use for terrorist and criminal purposes Pre-paid cards will continue to be an accessible instrument. In addition, anonymous prepaid cards issued outside the Union will only be used in the Union where they can be shown to comply with requirements equivalent to the ones in 4AMLD.
- 3. Give new powers to FIUs to request information from any obliged entity:
The 4AMLD already includes a number of provisions to facilitate cooperation between Financial Intelligence Units (FIUs). The Commission proposes to reinforce these rules, aligning them with the most recent international standards on access to information. This answers the need to allow FIUs to play an important role in identifying the financial operations of terrorist networks across borders and in detecting their financial backers.
- 4. Enable FIUs and competent authorities to identify holders of bank and payment accounts:
The Commission proposes to require Member States to set up automated centralised mechanisms so as to swiftly identify holders of bank and payment accounts. This will allow Member States to choose between setting up (i) a central registry, containing the necessary data allowing for the identification of holders of bank and payment accounts, and granting their own national FIUs and AML/CFT competent authorities a full and swift access to the information kept in the registry, and (ii) other centralised mechanisms, such as central data retrieval systems, which allow the same objective to be met. This will lead to a faster detection - both nationally and internationally - of suspicious ML/TF transactions, and improve preventive action.
- 5. Harmonise the EU approach towards high-risk third countries:
Currently, each Member State may adopt a specific list of Enhanced Customer Due Diligence measures towards high-risk countries. Harmonisation of these measures will avoid the risk of forum-shopping based on how jurisdictions apply more or less stringent regulations towards high-risk third countries. The ECDD proposed measures are fully compliant with the lists of such actions drawn up by the Financial Action Task Force (‘FATF’).
- 6. Improve transparency: new rules on access to beneficial ownership information:
The 4AMLD sets out rules on the collection, storing and access to information on the ultimate beneficial owners of companies, trusts and other types of legal arrangements. The Commission proposes:
- public access to such information for companies (by amending the 1st Company Law Directive)
- public access to such information for trusts engaged in commercial or business-like activities (by amending the 1st Company Law Directive)
- access to such information on a legitimate-interest basis for family or charitable trusts.
The Commission also proposes to clarify that, for trusts, the Member State that must ensure registration is the one where a trust is administered.
- 7. Interconnection of national central registers:
The interconnection will allow competent authorities, FIUs and obliged entities to identify the beneficial owners in an easy and efficient way, and will increase the transparency requirements on companies and trusts. It will also allow the public to access the beneficial ownership information across the EU.
- 8. Additional technical clarifications:
This includes the types of entities monitored (addition of existing customers, under certain conditions), exclusion of closed-loop cards from the 4AMLD, clarification of the concept of “competent authority”, and accurate references to electronic identification means.
- 9. Earlier transposition:
The Commission calls Member States to bring transposition of the entire anti-money laundering framework into national law forward to 1 January 2017.