Still it is not clear in what way the Fourth European Anti-Money Laundering Directive (AMLD4) will change.
This is worrisome because the current version of AMLD4 is already complicated legislation and will need a lot of attention, both by the national legislators and the companies that have to observe anti-money laundering legislation.
According to the forecast in the European Parliament procedure file on 28 February 2017 vote is scheduled in committee, 1st reading/single reading. So it seems it will take some time the final version of the AMLD4-revision is made public.
Fundamental changes
Recently the opinion by Committee on Legal Affairs (JURI) of the European Parliament was published. In the original proposal and in this opinion fundamental changes to AMLD4 are proposed. Some of them I will mention in this post.
[1] Lower threshold beneficial ownership (10%) and public access to beneficial ownership information. From the introduction of the opinion:
VI. Access to beneficial ownership information
One of the most important aspects of the proposal concerns increased obligations to declare, and provide access to, information on the beneficial ownership of corporate structures, trusts, and similar arrangements. Many recent financial and political scandals have shown that such arrangements can be a way of avoiding taxes or proper supervision of financial affairs. The proposal aims to give public access to a more comprehensive register containing certain information on the beneficial ownership of corporate structures or trusts, instead of granting access only to certain bodies. Furthermore, the rules on the place of registration of trusts are also clarified.
Your rapporteur considers that this increased transparency is essential in order to maintain public confidence in the financial system. It is particularly important that the threshold for declaring a beneficial interest should be sufficiently low – the Commission’s proposal to lower it from 25% to 10% can be approved.
[2] Virtual currencies and online payments: applicability is extended to issuers, administrators, intermediaries and distributors of virtual currencies, and administrators and providers of systems for online payments (amendment 5, see also other amendments).
[3] Safe deposit boxes: information on the identity of holders of safe deposit boxes, their proxy holders, and their beneficial owners has to be made available to the authorities (amendments 11, 30 and 57).
[4] Senior management to be registered in the ubo-register: when no beneficial owner is identified, the senior management should be registered. See amendment 25:
(aa) in point (6) (a), point (ii) is replaced by the following:
“(ii) if, after having exhausted all possible means, the entity fails to provide the identity of any natural person who meets the criteria set out in point (i), the obliged entities shall record that no beneficial owner exists and keep records of the actions taken in order to identify the beneficial ownership under point (i). Where there is any doubt that the person(s) identified are the beneficial owner(s), a record of that doubt shall be made. In addition, obliged entities shall identify and verify the identity of the relevant natural person who holds the position of senior managing official, who shall be identified as the “senior manager” (and not as “beneficial owner”), and record details of all legal owners of the entity;”
Unanswered questions regarding this topic:
- Is it the idea that every entity has a beneficial owner, and if yes: what is the reason for that thought? (In the Netherlands many not-for-profit organisations have no beneficial owners. What is the reason there should be artificially ‘appointed’ beneficial owners?)
- For what reason senior managers have to be registered in the ubo-register, when an entity has no ‘regular’ beneficial owner? Why the ‘senior manager’ instead of the formal managing director of the entity? Why is this done when the managing director is already registered with the trade registers in the European countries?
[5] Sanction list screening: is to be included in AMLD4, according to the amendments proposed in the opinion (amendments 32, 33).
[6] Beneficial ownership of real estate: the JURI committee wants to introduce rules regarding beneficial ownership of real estate (amendment 59).
(12a) the following Article is inserted:
“Article 32b
1. Member States shall put in place automated centralised mechanisms, such as central registries or central electronic data retrieval systems, which allow the identification, in a timely manner, of any natural or legal persons holding or controlling land and buildings within their territory. Member States shall notify the Commission of the characteristics of those national mechanisms.
2. Member States shall ensure that the information held in the centralised mechanisms referred to in paragraph 1 is directly accessible, at national level, to FIUs and competent authorities. Member States shall ensure that any FIU is able to provide information held in the centralised mechanisms referred to in paragraph 1 to any other FIUs in a timely manner in accordance with Article 53.
3. The following information shall be accessible and searchable through the centralised mechanisms referred to in paragraph 1:
– for the real property owner and any person purporting to act on behalf of the owner: the name, complemented by the other identification data required under the national provisions transposing point (a) of Article 13(1) or a unique identification number;
– for the beneficial owner of the real property: the name, complemented by the other identification data required under the national provisions transposing point (b) of Article 13(1) or a unique identification number;
– for the real property: date and cause of ownership acquisition, mortgage and rights other than ownership;
– for the land: location, parcel number, land category (current state of land), parcel area (area of land);
– for the building: location, parcel number, building number, type, structure, floor area.
4. Member States shall cooperate among themselves and with the Commission in order to establish by 1 January 2018 a European real property register in accordance with paragraph 1 building on the European Land Information Service (EULIS)”.
[7] European FIU: the JURI committee proposes to establish a European FIU (amendment 62).
Unanswered questions
In this opinion and in other documents regarding AMLD4 no explanation is given on important subjects like:
- In what way the information in the beneficial owners registers (‘ubo-registers’) will become open data? Will data brokers and criminals have the possibility to receive the complete beneficial owner information from the ubo-registers?
- It is to be expected that many beneficial owners will be faced with new risks caused by the public availability of their personal information (like their full name and their full birth date); what measures will be taken to prevent harm, to hold the offender liable and to compensate the victims for the damage?
- Are the IT-systems of all European countries to be trusted and are they adequately protected against cyber-crime?
- Will there be adequate systems and procedures in all European countries to prevent mistakes and incorrect information creeping into the the enormous databases that are going to be created based on this legislation.
- Are those in the countries of the European Union that have access to the information in the several registers (owners of entities and real estate, holders of bank accounts, etcetera) to be trusted with that information? How the access on need-to-know-basis will be monitored?
- How the enormous databases and the exchange of data between and within countries is monitored?
Final remark
It is strange that this legislation procedure regarding AMLD4 is continuing without any thought on the practical aspects and the risks attached. Apparently the European actors are motivated by tax scandals and the wish to satisfy the public with ‘strong’ measures. Hopefully decent beneficial owners and decent companies will not become victim of this legislation.
More information:
Ellen Timmer - juridische artikelen en berichten 