By Linda Ziehms, Senior Associate, Hambach & Hambach
Although the transposition of the 4th EU Directive on the prevention of Money Laundering (EU 2015/ 849 – 4th AMLD) is currently underway in all EU Member States with 26 June 2017 as deadline for the implementation, the EU Commission has proposed a new Directive (5th AMLD) in July 2016 amending the revised AML framework not yet put into force on national level. The said proposal of the 5th AMLD was prompted by the terrorist attacks in France 2015 as part of the Action Plan to strengthen the fight against the financing of terrorism published by the EU Commission in February 2016. The EU Commission asked the EU Member States to consider these – compared with the provisions of the 4th AMLD – stricter rules in their transposition process to be finished by June 2017 although the legislative decision process on EU level is not completed yet.
Key Elements of the 4th AMLD and proposed 5th AMLD (jointly AMLD):
- Introduction of centralized registers and registration duties (content, place of registration etc.) for recording beneficial ownership in companies and trust pursuing business activities as main goal on EU and Member State level
- Improved access rights of companies, press, social media etc. to the said registers of beneficial owners and trusts to increase transparency and to strengthen confidence in the financial markets and investors
- Extension of the scope of the 4th AMLD to impose its monitoring and Compliance rules to providers of exchange services for crypto-currencies (e.g. Bitcoins) and custodian wallet providers to close gaps in web-based financial activities
- Increased transparency by lowering maximum transaction limits for certain E-money products without identification requirements, e.g. non-reloadable pre-paid cards, from EUR 250 to EUR 150
- Strict identification requirements for the use of non-reloadable pre-paid cards for web-based transactions
- Settlement of E-Money transactions related to Acquirer payments are allowed only if the relevant E-Money was issued in a (Non-EU) country with an AML framework comparable with the prevention level of the EU
- Extension of Customer Due Diligence (CDD) requirements for Political Exposed Persons (PEP) covering PEP domiciled in all EU Member States
- Increased and clearly defined CDD requirements for obliged parties detailing the Risk-based Approach of the AMLDs with respect to customers or activities in High-Risk (third) Countries named in the respective official list to be published by the EU.
- Requirement of all Member States to set up central electronic registers or data retrieval systems with information on the identity of holders and payment accounts with access rights for Financial Intelligence Units (FIUs)
- Higher transparency and more efficient supervision by an increased information exchange between the EU Member States and the relevant regulatory bodies (i.e. FIUs).
- Stricter sanctions regime (e.g. fines of up to EUR 1 million) for certain cases of Non-Compliance of obliged parties with the provisions of the AMLD as transposed into the national laws of the respective EU Member State.
For all obliged parties subject to the AMLD these requirements will lead to additional adaptions of their internal measures to prevent Money Laundering and terrorist funding in compliance with the regulatory framework. Issuers of E-Money in certain (Non-EU) countries and providers of settling Acquirer payments in E- Money in the EU will have to reconsider at least parts of their business model if the proposed 5th AMLD comes into force as currently proposed. Crypto-currency exchange platforms and custodian wallet providers are well-advised to prepare for applying the outlined provisions of the AMLD although the timeframe for implementation is still in discussion since the i.e. the European Banking Authority has doubts on the feasibility of the intended implementation date in June 2017 given the specificities of virtual currencies.