AMLA and the independence of lawyers | AML Package

The AMLA Package is relevant for the independence of lawyers (here to be read as ‘advocaten’ in Dutch and ‘Rechtsanwälte’ in German).

Public authority in charge of overseeing the self regulatory bodies (AMLD6)
In the proposal for the 6th AML/CFT directive (AMLD6), a national public authority in charge of overseeing the self regulatory bodies (‘SRBs’)  is introduced in article 38. This also applies to lawyers and will endanger their independence.

EU authority for anti-money laundering
The Council accepts the proposal for such a public authority, this is shown in yesterday’s partial position of the Council on Authority for Countering Money Laundering and Financing of Terrorism (AMLA).
According to the version of the Council of the proposal for ‘AMLAR’, the regulation regarding AMLA, AMLA will have powers over supervisory authorities in the non-financial sector, that will include the supervisory authorities of lawyers.

Investigations by AMLA
According to article 32 AMLAR, AMLA is entitled to investigate if a supervisory authority in the non-financial sector has not applied the Union acts or the national legislation, or has applied them in a way which appears to be a breach of Union law, in particular by failing to ensure that an entity under its supervision or oversight satisfies the requirements laid down in those acts or in that legislation. Such an investigation may lead to a recommendation to the supervisory authority in the non-financial sector concerned setting out the action necessary to comply with Union law.

AMLA’s peer reviews
Article 31 AMLAR concerns ‘peer reviews’ by AMLA of the activities of supervisory authorities in the non-financial sector, with elements like:

  • the adequacy of powers and financial, human and technical resources, the degree of independence, the governance arrangements and professional standards of non-financial supervisor;
  • the effectiveness and the degree of convergence reached in the application of Union law and in supervisory practice, and the extent to which the supervisory practice achieves the objectives set out in Union law;
  • the application of best practices developed by supervisory authorities in the non-financial sector whose adoption might be of benefit for other non-financial supervisors;
  • the effectiveness and the degree of convergence reached with regard to the enforcement of the provisions adopted in the implementation of Union law, including the administrative sanctions and other administrative measures imposed against persons responsible where those provisions have not been complied wit;
  • the assessment of the implementation of measures that are taken by the public authority in charge of overseeing SRBs to ensure that they perform their function in accordance with Union law.

Given the experience with financial supervision and the anti-money laundering rules in the financial sector, it is doubtful that the European rules will be of any use to the legal profession. Furthermore, it is to be feared that people from the financial sector will be employed to supervise lawyers, raising doubts as to whether they have sufficient knowledge of the profession.

One thing is certain: this will be very expensive and will make lawyers’ services even more inaccessible to SMEs and consumers.

It is to be expected that the Dutch ‘College van Toezicht advocatuur‘, that already consists of two members from the financial sector, will be transformed in the public authority of article 38 AMLD6. It confirms the takeover by the Dutch Ministry of Finance of the legal profession.

 

More information:

 

Article 31 AMLAR, version Council:

Article 31
Peer reviews

1. The Authority shall periodically conduct peer reviews of some or all of the activities of supervisory authorities in the non-financial sector to strengthen consistency and effectiveness in supervisory outcomes. To that end, the Authority shall develop methods to allow for an objective assessment and comparison between supervisory authorities reviewed taking into account their specificities and characteristics. When planning and conducting peer reviews, the Authority shall avoid duplication of assessments or reports already available with regard to the non-financial supervisory authorities concerned, which have been drawn up by international organisations and intergovernmental bodies competent in the field of preventing money laundering and the financing of terrorism. Existing information, including any relevant information provided to the Authority in accordance with Article 11, and any relevant information from stakeholders shall be taken into account.

2. For the purposes of this Article, the Authority shall establish ad hoc peer review committees, which shall be composed of staff from the Authority and members of supervisory authorities in the non-financial sectors. The peer review committees shall be chaired by a member of the Authority’s staff. The Chair of the Authority shall, following a call for proposals, propose the chair and the members of a peer review committee which shall be approved by the Executive Board.

3. The peer review shall include an assessment of, but shall not be limited to:

(a) the adequacy of powers and financial, human and technical resources, the degree of independence, the governance arrangements and professional standards of non-financial supervisor to ensure the effective application of Chapter IV [OP please insert the next number to the AMLD, COM(2021)423];
(b) the effectiveness and the degree of convergence reached in the application of Union law and in supervisory practice, and the extent to which the supervisory practice achieves the objectives set out in Union law;
(c) the application of best practices developed by supervisory authorities in the non-financial sector whose adoption might be of benefit for other non-financial supervisors;
(d) the effectiveness and the degree of convergence reached with regard to the enforcement of the provisions adopted in the implementation of Union law, including the administrative sanctions and other administrative measures imposed against persons responsible where those provisions have not been complied with.

4. The Authority shall produce a report setting out the results of the peer review. That peer review report shall be prepared by the peer review committee. A draft version of the report shall be submitted to the concerned supervisory authorities in the non-financial sector or the supervisory authorities in the non-financial sector subject to the assessment for comments, prior to its consideration by the General Board in supervisory composition. The report shall be adopted by the Executive Board, having received the observations of the General Board in supervisory composition as to the consistency of application of the methodology with other peer review reports. The report shall explain and indicate the follow-up measures that are deemed appropriate, proportionate and necessary as a result of the peer review. Those follow-up measures may be adopted in the form of guidelines and recommendations pursuant to Article 43 and opinions pursuant to Article 44. The supervisory authorities in the non-financial sector shall make every effort to comply with any guidelines and recommendations issued, in accordance with Article 43.

5. The Authority shall submit an opinion to the Commission where, having regard to the outcome of the peer review or to any other information acquired by the Authority in carrying out its tasks, it considers that further harmonisation of Union rules applicable to obliged entities in the non- financial sector or to supervisory authorities in the non-financial sector would be necessary from the Union’s perspective.

6. The Authority shall provide a follow-up report two years after the publication of the peer review report. The follow-up report shall be prepared by the peer review committee and adopted by the Executive Board, having received the observations of the General Board in supervisory composition on the consistency with other peer review reports. The follow-up report shall include an assessment of the adequacy and effectiveness of the actions undertaken by the supervisory authorities in the non-financial sector that were subject to the peer review in response to the follow- up measures of the peer review report. The Authority shall publish the findings of the follow-up report on its website.

7. For the purposes of this Article, the Executive Board shall adopt a peer review work plan every two years, after approval by the General Board, which shall reflect the lessons learnt from the past peer review processes and discussions held in the General Board in supervisory composition. The peer review work plan shall constitute a separate part of the annual and multiannual working programme and shall be included in the Single Programming Document. In case of urgency or unforeseen events, the Authority may decide to carry out additional peer reviews.

8. When supervision is performed by SRBs, the peer review exercise shall include the assessment of the implementation of measures pursuant to Article 38 of [OP please insert the next number to the AMLD, COM(2021)423] that are taken by the public authority in charge of overseeing these bodies to ensure that they perform their function in accordance with Union law.
9. On a case by case basis, when SRBs indicate an interest to participate in a peer review exercise, representatives of such bodies entrusted with supervisory functions may be invited to participate in that peer review. Article 31 (1) to (6) shall apply accordingly.

Article 32 AMLAR, version Council:

Article 32
Powers over supervisory authorities in the non-financial sector

1. Where a supervisory authority in the non-financial sector has not applied the Union acts or the national legislation referred to in Article 1(2), or has applied them in a way which appears to be a breach of Union law, in particular by failing to ensure that an entity under its supervision or oversight satisfies the requirements laid down in those acts or in that legislation, the Authority shall act in accordance with the powers set out in paragraphs 2, 3, 4, 6 and 7 of this Article.
2. Upon request from one or more supervisory authorities in the non-financial sector, the European Parliament, the Council, or the Commission, including when this is based on well- substantiated information from natural or legal persons, and after having informed the supervisory authority in the non-financial sector concerned, the Authority shall outline how it intends to proceed with the case and, where appropriate, investigate the alleged breach or non-application of Union law.
The supervisory authority shall, without delay, provide the Authority with information which the Authority considers necessary for its investigation including information on how the Union acts or in that legislation referred to in Article 1(2) are applied in accordance with Union law.
Whenever requesting information from the supervisory authority concerned has proven, or is deemed to be, insufficient to obtain the information that is deemed necessary for the purposes of investigating an alleged breach or non-application of Union law, the Authority may, after having informed the supervisory authority, address a duly justified and reasoned request for information directly to other supervisory authorities.
The addressee of such a request shall provide the Authority with clear, accurate and complete information without undue delay.
3. The Authority may, not later than six months from initiating its investigation, address a recommendation to the supervisory authority in the non-financial sector concerned setting out the action necessary to comply with Union law.
Before issuing such a recommendation, the Authority shall engage with the supervisory authority concerned, where the Autority or the supervisory authority consider such engagement appropriate in order to resolve a breach of Union law, in an attempt to reach agreement on the actions necessary for compliance with Union law.
The supervisory authority in the non-financial sector shall, within one month of receipt of the recommendation, inform the Authority of the steps it has taken or intends to take to ensure compliance with Union law.
6. Where the supervisory authority is a public authority overseeing a SRB, and where it does not comply with the recommendation referred to in paragraph 3 within the period specified therein, the Authority may issue a recommandation to an SRB to ensure it acts in accordance with Union law.
7. Recommendations adopted in accordance with paragraph 6 shall prevail over any previous measures adopted by the supervisory authority on the same matter.

Article 38 AMLD6, draft Commission:

Article 38
Oversight of self-regulatory bodies

1. Where Member States decide, pursuant to Article 29(3), to allow self-regulatory bodies to perform supervision of the entities referred to in Article 3, points (3)(a), (b) and (d), of Regulation [please insert reference – proposal for Anti-Money Laundering Regulation – COM/2021/420 final], they shall ensure that the activities of such self-regulatory bodies in the performance of such functions are subject to oversight by a public authority.

2. The authority overseeing self-regulatory bodies shall be responsible for:
(a) verifying that any self-regulatory body performing the functions or aspiring to perform the functions referred to in Article 29(1) satisfies the requirements of paragraph 3 of that Article;
(b) issuing guidance as regards the performance of the functions referred to in Article 29(1);
(c) ensuring that self-regulatory bodies perform their functions under Section 1 of this Chapter to the highest standards;
(d) reviewing the exemptions granted by self-regulatory bodies from the obligation to draw up an individual documented risk assessment pursuant to Article 29(4), point (b).

3. Member States shall ensure that the authority overseeing self-regulatory bodies is granted adequate powers to discharge its responsibilities under paragraph 2. As a minimum, Member States shall ensure that the authority has the power to:
(a) compel the production of any information that is relevant to monitoring compliance and performing checks, except for any information collected by obliged entities referred to in Article 3, points (3)(a), (b) and (d), of Regulation [please insert reference – proposal for Anti-Money Laundering Regulation – COM/2021/420 final] in the course of ascertaining the legal position of their client, or for performing the task of defending or representing that client in, or concerning, judicial proceedings, including providing advice on instituting or avoiding such proceedings; whether such information was collected before, during or after such proceedings;
(b) issue instructions to a self-regulatory body for the purpose of remedying a failure to perform its functions under Article 29(1) or to comply with the requirements of paragraph 6 of that Article, or to prevent any such failures. When issuing such instructions, the authority shall consider any relevant guidance it provided or that has been provided by AMLA.

4. Member States shall ensure that the authority overseeing self-regulatory bodies informs the authorities competent for investigating and prosecuting criminal activities timely, directly or through the FIU, of any breaches which are subject to criminal sanctions that it detects in the performance of its tasks.

5. The authority overseeing self-regulatory bodies shall publish an annual report containing information about:
(a) the number and nature of breaches detected by each self-regulatory body and the administrative measures or sanctions imposed on obliged entities;
(b) the number of suspicious transactions reported by the entities subject to supervision by each self-regulatory body to the FIU, whether submitted directly pursuant to Article 50(1) of Regulation [please insert reference – proposal for Anti-Money Laundering Regulation – COM/2021/420 final], or forwarded by each self-regulatory body to the FIU pursuant to Article 51(1) of that Regulation;
(c) the number and description of measures taken under Article 40 by each self-regulatory body to monitor compliance by obliged entities with the requirements of Regulation [please insert reference – proposal for Anti-Money Laundering Regulation – COM/2021/420 final] referred to in Article 40(1);
(d) the number and description of measures taken by the authority overseeing self-regulatory bodies under this Article and the number of instructions issued to self-regulatory bodies.
Such report shall be made available on the website of the authority overseeing self-regulatory bodies and submitted to the Commission and AMLA.

Over Ellen Timmer, advocaat ondernemingsrecht @Pellicaan

Verbonden aan Pellicaan Advocaten, http://www.pellicaan.nl/, kantoor Rotterdam, telefoon 088-6272287, fax 088-6272280, e-mail ellen.timmer@pellicaan.nl ||| Weblogs: algemeen: https://ellentimmer.com/ || modernisering ondernemingsrecht: http://flexbv.wordpress.com/ ||| Motto: goede bedoelingen rechtvaardigen geen slechte regels
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