Europe is carrying out a complete overhaul of anti-money laundering (AML) and countering terrorist financing (CFT) legislation, while the previous rules have barely settled with the authorities and the ‘obliged entities’ (companies that have AML/CFT tasks, like banks).
Europe is also completely disinterested in the negative aspects of AML/CFT, like discrimination and de-risking. It is making rules to combat crime and is hurting decent people.
The most relevant files are:
- 2021/0239(COD) – the Anti-Money Laundering Regulation (‘AMLR’)
- 2021/0250(COD) – the new AML/CFT directive
Anti-Money Laundering Regulation
Purpose of AMLR is to harmonize AML/CFT rules in the EU. According to the summary of the European Parliament the reasons for AMLR are:
Legislative gaps in one Member State have an impact on the EU as a whole.
It is therefore necessary that rules on matters currently covered in Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing which may be directly applicable by the obliged entities concerned are addressed in a new Regulation in order to achieve the desired uniformity of application. (…)
The aim is to improve the detection of suspicious transactions and activities, and close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system.
CONTENT: the Commission proposal aims to lay down rules on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing with the objective of setting up a single EU rulebook for AML/CFT which will harmonise AML/CFT rules across the EU, including, for example, more detailed rules on customer due diligence, beneficial ownership and the powers and task of supervisors and Financial Intelligence Units (FIUs). Existing national registers of bank accounts will be connected, providing faster access for FIUs to information on bank accounts and safe deposit boxes.
The Commission will also provide law enforcement authorities with access to this system, speeding up financial investigations and the recovery of criminal assets in cross-border cases.
There will be major changes that are summarized as:
The proposed regulation makes a number of changes to the existing AML/CFT Directive in order to bring about a greater level of harmonisation and convergence in the application of AML/CFT rules across the EU:
– in order to mitigate new and emerging risks, the list of obliged entities is expanded to include crypto-asset service providers but also other sectors such as crowdfunding platforms and migration operators;
– to ensure consistent application of rules across the internal market, requirements in relation to internal policies, controls and procedures are clarified, including in the case of groups, and customer due diligence measures are made more granular, with clearer requirements according to the risk level of the customer;
– the requirements in relation to third countries are reviewed to ensure that enhanced due diligence measures are applied to those countries that pose a threat to the Union’s financial system;
– requirements in relation to politically exposed persons are subject to minor clarifications, particularly as regards the definition of a politically exposed person;
– beneficial ownership requirements are streamlined to ensure an adequate level of transparency across the Union, and new requirements are introduced in relation to nominees and foreign entities to mitigate risks that criminals hide behind intermediate levels;
– to guide more clearly reporting of suspicious transactions, red flags raising suspicion are clarified, whereas disclosure requirements and private-to-private sharing of information remain unaltered;
– in order to ensure full consistency with EU data protection rules, requirements for the processing of certain categories of personal data are introduced and a shorter time-limit is provided for retention of personal data;
– provisions preventing traders in goods or services from accepting cash payments of over EUR 10 000 for a single purchase, while allowing Member States to maintain in force lower ceilings for large cash transactions.
The proposed directive repeals Directive (EU) 2015/849 (4th AML Directive, AMLD4). Major changes according to the summary are:
The proposed directive:
– enables Member States to extend the requirements of the accompanying draft Regulation to other sectors not covered in the scope of that Regulation. A consolidated list of the sectors to which Member States have extended the list of obliged entities will be published by the Commission in the Official Journal of the European Union on an annual basis;
– sets out specific regulatory requirements that Member States are to implement in national law for certain sectors. Specifically, currency exchange and cheque cashing offices, and trust or company service providers must be subject to either licensing or registration requirements; gambling service providers must be regulated;
– allows supervisors of the Member States where electronic money issuers, payment service providers and crypto-assets service providers are active via freedom to provide services to appoint contact points in those Member States;
– confirms the probity requirements for senior managers in certain obliged entities as in the current framework, complementing fit and proper requirements in other EU acts, and clarifies that certain requirements also apply to beneficial owners of those obliged entities. For other obliged entities, it confirms the prohibition for persons convicted of money laundering, its predicate offences or terrorist financing to operate them. This draft Directive grants certain powers to national supervisors over the senior management of certain obliged entities, especially in the case of conviction for money laundering or terrorist financing;
– obliges Member States to create and maintain mechanisms, such as a central register or a central electronic data retrieval system, to allow identification of holders of bank accounts and safe deposit boxes, contained in the current AML Directive;
– lays down the creation of a cross-border interconnection between such mechanisms;
– includes new provisions on the responsibilities and tasks of the Financial Intelligence Units (FIUs) such as clarifications on the financial analysis function of FIUs and on their operational independence, their resources and their security; provisions on information exchange between FIUs and other competent authorities.
Anti-Money Laundering Regulation
2021/0239(COD) – Prevention of the use of the financial system for the purposes of money laundering or terrorist financing
2021/0250(COD) – Prevention of the use of the financial system for the purposes of money laundering or terrorist financing: mechanisms to be put in place by the Member States