The EU Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing of 30 May 2018 was published in the Official Journal on 19 June 2018.
The Council and the EU Parliament had previously adopted the text of the Fifth AML Directive on 14 May and 19 April 2018 respectively.
The new Directive should be considered in the light of recent events, such as the threat of terrorism and the issue of the use of offshore entities, which again made headlines this week as another 1.2 million documents were leaked in the Panama Papers case.
The amendments to the existing AML framework include extension of the personal scope of the AML framework, substantial amendments regarding access to information on beneficial ownership of legal entities, limits on the anonymous use of prepaid cards and virtual currencies, and improved checks in relation to transactions with high-risk third countries.
The Directive also addresses the issue of whistleblower protection.
Extension of the personal scope of application of the AML framework
Although the EU AML framework already included auditors, external accountants and tax advisers, the new Directive now adds other persons whose principal business or professional activity consists of (in)directly providing services on tax matters.
Estate agents are covered by the AML legislation, including when they act as intermediaries in the letting of immovable property, provided that the monthly rent linked to such transactions amounts to at least EUR 10,000.
Art dealers or intermediaries in the field of art trading are covered where a transaction or a series of linked transactions involves an amount of at least EUR 10,000.
The EU legislator now obliges providers of exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers, to comply with the EU AML legislation.
Access to information on beneficial ownership of legal entities
The new Directive maintains the distinction between (1) access to core information on the beneficial ownership for legal entities active within the EU and (2) access to core information on the beneficial ownership of trusts and similar structures.
Public access to information in the first category is broadened, as a legitimate interest is no longer required to gain access. Nevertheless, Member States can make access subject to the payment of a fee linked to the administrative costs of providing the information, as well as to online registration.
Access to information on trusts and similar structures still requires evidence of a legitimate interest and can be made subject to the aforementioned fee and online registration.
The Directive allows Member States to exclude access to the information on a case-by-case basis if beneficial owners would be exposed to a disproportionate risk – of fraud or kidnapping, for example.
Member States are required to demand that the information on beneficial ownership is maintained in an adequate, accurate and up-to-date manner. The different national registers are to be interconnected.
Anonymous prepaid cards
The cloak of anonymity for anonymous prepaid cards is further reduced, as the threshold previously set at EUR 250 is lowered to EUR 150. Anonymous cash withdrawal through such instruments is now limited to EUR 50 instead of EUR 100.
Transactions with high-risk third countries
Certain third countries, such as the Democratic People's Republic of Korea, have traditionally been considered to present a high level of AML risk.
The newly published Directive imposes enhanced customer due diligence measures on transactions or business relationships with high-risk third countries, including obtaining additional information on the customer, the beneficial owner and the intended nature of the business relationship, as well as the approval of senior management to enter into or maintain business relationships.
Additional points of interest
The following changes are also worth mentioning:
- The Directive requires Member States to offer additional protection to individuals who have reported internally or to a Financial Intelligence Unit on suspicions of money laundering or terrorist financing, by providing them with a complaint mechanism when faced with prejudicial effects of that reporting.
- Member States and the Commission are required to keep an up-to-date list of the functions that qualify as prominent public functions.
- Financial Intelligence Units will have access to information more easily, e.g. in relation to immovable property.
The general implementation deadline is 10 January 2020, but some changes only need to be implemented by 10 March 2020. The interconnection of the registers on beneficial ownership is to be achieved by 10 March 2021.
Please feel free to contact us should you have any further questions or if you would like advice on Belgian or EU AML legislation.