European Union Money Laundering Directives Overview
I write this subject for the CAMS examinee. I want to recall the questions of my examination which was held on 31.10.2017. After recalling I found in my memory that a few questions from European Union Directives on Money Laundering existed in the 120 questions of CAMS examination.
So, I think this topic will be helpful for qualifying the gold standard certification i.e. CAMS.
FIRST EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
The first European Union (EU) Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering (Directive 91/308/EEC),” was adopted by the Council of the European Communities in June 1991.
Like all directives adopted by the Council, it required member states to achieve (by amending national law, if necessary) the specified results. This First European Union Directive required the members to enact legislation to prevent their domestic financial systems from being used for money laundering.
The unique nature of the EU as a “community of states” makes it fundamentally different from other international organizations. The EU can adopt measures that have the force of law even without the approval of the national parliaments of the various member states.
Plus, European law prevails over national law in the case of directives. In this respect, European Union (EU) Directives have far more weight than the voluntary standards issued by groups such as the Basel Committee or FATF. Of course, the Directive applies only to EU member states and not to other countries.
The First European Union Directive of 1991 confined predicate offenses to money laundering to drug trafficking as defined in the 1988 Vienna Convention. However, member states were encouraged to extend the predicate offenses to other crimes.
SECOND EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
In December 2001, the European Union (EU) agreed on a Second Directive (Directive 2001/97/EEC) that amended the first one to require stricter money laundering controls across the continent.
Member states agreed to implement it as national law by June 15, 2003; however, only Denmark, Germany, the Netherlands and Finland met the deadline, with Ireland and Spain complying shortly afterwards. Other member states eventually followed.
The following were the key features of the Second European Union Directive on Money Laundering (ML):
— Concealing or disguising the nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that the property is derived from criminal activity or from an act of participation in that activity.
— The acquisition, possession or use of property, knowing, when it is received, that it was derived from criminal activity or from an act of participation in the activity.
— Participation in, association to commit, the attempt to commit, and the aiding, abetting, facilitating or counseling the commission of any of the mentioned actions.
The Second European Union Directive was a tremendous step forward because its applicability included many of the important financial centers of the world. It went well beyond similar standards issued by other organizations such as the UN and even FATF.
THIRD EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
A Third European Union (EU) Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing, (Directive 2005/60/EC)” based on elements of FATF’s revised 40 Recommendations, was adopted in 2005.
The Third EU Directive was to be implemented by member states by December 15, 2007. While several countries did not meet this original deadline, the directive was eventually implemented by all members. In line with FATF’s anti-money laundering recommendations, the Third European Union Directive on Money Laundering extended the scope of the first and second directives by:
1. The definition of politically exposed persons (PEPs). The Third defined PEPs as, “natural persons who are or have been entrusted with prominent public functions and the immediate family members, or individuals known to be close associates, of such persons.”
Close associates must be identified only when their relationship with a PEP is publicly known or when the institution suspects there is a relationship. Finally, the commission said persons should not be considered PEPs after one year of not being in a prominent position.
2. The inclusion of lawyers among those who are required to report suspicious activity.
3. The precise role of a “comitology committee.” The European Commission coined the term
“comitology,” which means the EU system that oversees the implementation of acts proposed by the European Commission.
FOURTH EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
The fourth European Union Directive (EU) 2015/849 of the European Parliament and of the Council of 20, May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, entered into effect on June 26, 2015.
Member states have two years from that date to adapt their national legislations accordingly. This directive repealed the Third EU Directive and its predecessors.
Changes in the Fourth EU Money Laundering Directive include:
— PEP’s family members and persons known to be close associates.
— Senior management and others.
— Product or service, transaction or delivery channel risk factors, such as low premium insurance policies versus private banking.
— Geographical risk factors, such as member states versus countries subject to sanctions.
FIFTH EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
On June 19th, 2018, the fifth EU Anti-Money Laundering Directive (AMLD 5) was published in the official journal of the European Union. The 5th EU directive on money laundering modifies the fourth Anti-Money Laundering Directive (AMLD4) released only in 2015.
The EU Commission proposed the revised AMLD in July 2016 as part of its Action Plan against terrorism announced in February 2016, after the attacks in Paris and Brussels, and as a reaction to the Panama Papers published in April 2016.
The plan to implement the changes by January 2017 resulted overambitious; a final compromise text was reached only in December 2017. The 5th EU directives on money laundering entered into force on July 9, 2018.
Member states are obliged to transpose the modified regulations into national law by latest January 20, 2020. Particulars are:
1. New service providers in scope:
The fifth European Directives on Money Laundering (AMLD5) will apply to virtual currency exchange service providers and electronic wallet providers in order to cover the risks associated with virtual currencies like bitcoins.
Persons who provide tax related services but are not obliged auditors, accountants or tax advisors will also be in scope of the AMLD5. Furthermore, traders of art will be obliged parties to the extent they trade at values above 10.000 Euros.
2. Public access to beneficial ownership information:
Registers of beneficial ownership information created under the 4th EU directive on money laundering will be made accessible to the general public. The need to demonstrate a legitimate interest for access will be eliminated except for trusts and similar legal arrangements.
In that case access to beneficial ownership information will be granted to any natural or legal person that can demonstrate a legitimate interest as well as to any person filing a request in relation to a trust or similar legal arrangement which holds or controls any corporate or other legal entity.
Access will comprise, as a minimum: the beneficial owner’s month and year of birth, country of residence, nationality, and the nature and extent of the beneficial interest held. Member states must implement mechanisms to ensure that information in those registers is accurate and up to date and apply effective sanctions in cases of breach.
Obliged entities will have to notify the authorities of discrepancies found while conducting customer due diligence (KYC) between the beneficial ownership information on the registers and the beneficial ownership information they hold otherwise.
Beneficial owners will have an explicit obligation to provide the corresponding entities with their beneficial ownership information required for the register. The EU Commission has been tasked to ensure the interconnection of the many registers at EU level by 10 March 2021.
Plans to lower the quorum for the determination of beneficial ownership to 10% for certain passive non-financial entities (PNFE) were not put into practice.
3. Know Your Customer: Obligation to consult beneficial ownership register:
When performing a KYC prior to any new business relationship, obliged parties must in future consult the corresponding beneficial ownership register in the EU. Reasonably, this can only apply once such a register is available and the counterpart is EU based.
4. PEP-Lists:
Member states will be obliged to draft a list of offices and functions that qualify as politically exposed (PEP) on national level and including nationally registered international organizations; the EU will draft a corresponding list on EU level, consolidate the national lists from member states and publish the result. The lists will not name any persons. National as well as EU based PEPs continue to be high risk for the purposes of the KYC, and require enhanced due diligence.
5. Enhanced Due Diligence in respect of high-risk third countries:
Enhanced Due Diligence measures in relation to customers from third countries identified by the EU Commission as presenting an increased risk of money laundering, will be expanded and harmonized.
A new section introduces a set of strict enhanced due diligence measures obliged parties will have to perform. Member states will be entitled to require further measures like the use of bank accounts established in countries with EU or equivalent AML standards, for the first transaction in a business relationship.
Member States may introduce Additional Enhanced Due Diligence, like reporting obligations for financial transactions with counterparts in high risk third countries or limiting the foundation of companies by individuals from high risk third countries or the creation of companies by their own nationals in such high risk third countries.
6. Bank account and safe deposit box regulations:
Anonymous bank accounts, savings accounts or safe deposit boxes will be abolished with the 5th EU directive on money laundering. Member States must create central registries or central electronic data retrieval systems by latest 10 September 2020, which allow the timely identification of any natural or legal person holding or controlling bank or savings accounts and safe deposit boxes.
This information will be directly accessible by financial intelligence units (“FIUs”) and national competent authorities.
7. Access to Information on Holders of Real Estate:
Information on real estate ownership by any natural or legal person will be made centrally available for public authorities; this does not require the creation of a central real estate register. Alternatively, electronic data retrieval systems can be used.
8. Thresholds for Prepaid Cards and E-Money transactions will be lowered:
The threshold for identifying holders of prepaid cards will be further lowered from EUR 250 to EUR 150. E-Money Online transactions with prepaid cards will be limited to max. EUR 50. These amounts can be further lowered by member states, but not increased.
Under 4th EU directive, Member States may allow obliged entities to apply simplified due diligence measures with respect to e-money which meets certain conditions, including threshold amounts. 5th EU directive reduces these amounts and introduces restrictions on anonymous prepaid cards issued in third countries.
9. Measures to enhance the powers of the FIUs:
The rights and competences of national EU Financial Intelligence Units will be extended and the cooperation and exchange of information among FIUs and other relevant institutions further facilitated. For example, FIUs will be allowed access to the centralized bank account information referred to above.
Although the possibility was discussed to lower the threshold for beneficial ownership of certain vehicles (“passive non-financial entities”), it was not made a part of the final 5th EU directive text.
SIXTH EUROPEAN DIRECTIVE ON MONEY LAUNDERING:
By December 2020, the fight against money laundering by the European Parliament will step up a gear as the Sixth Anti-Money Laundering Directive (6AMLD) becomes fully transposed into law across all EU countries. Regulated entities operating within the zone will then have until June 2021 to implement relevant regulations.
It is critical that concerned companies familiarize themselves with 6th EU directive and the implications for compliance processes, as well as the future growth opportunities.
1. A harmonized definition of money laundering offences:
The Directive provides a harmonized definition of money laundering offences, aimed at removing loopholes in weak domestic legislation.
The 22 predicate offences now include cyber crime and environmental crime, a reflection of the changing nature of the threat landscape and shifting priorities within the European Union. To help understand the risk factors and classifications to look out for, compliance officers should familiarize themselves with the 22 predicate offences as listed in the new Directive.
2. Additional money laundering offences: aiding and abetting:
In addition to those converting the proceeds of crime, the scope of money laundering now includes “aiding and abetting”. By including this group of people, often known as “enablers” it will be easier to go after the people who act as accomplices in the money laundering process.
3. Extension of criminal liability to legal persons:
It is not just the individual that can be punished. One of the most significant changes under the new Directive is the extension of criminal liability to legal persons (i.e. companies or partnerships) where they failed to prevent the illegal activity conducted by a ‘directing mind’ within the company.
Even if the criminal activity that generated illicit funds cannot be identified, an individual or legal person can be convicted.
4. Tougher punishments:
Conviction is another area that has been amended in this latest directive. All states will have to set a maximum imprisonment of at least four years for money laundering offences. This is an increase from one year, as it was previously.
Any sentence may be supplemented with ‘effective, proportionate and dissuasive sanctions’ which can be combined with fines. This includes the full shut-down of a business.
Companies would be wise to view compliance as something that can enable rather than hinder business practices. Staying focused on managing the increasingly complex area of compliance with leading data and technology solutions. Innovation is the only way companies and individuals can reduce their risk exposure to the growing threat that is money laundering.
Reference:
1. CAMS Study Guide, 6th Edition
2. http://europa.eu/
3. https://globalcompliancenews.com/eu-5th-anti-money-laundering-directive-published-20180716
4. https://complyadvantage.com/blog/6amld-sixth-anti-money-laundering-directive/
So, I think this topic will be helpful for qualifying the gold standard certification i.e. CAMS.
 |
| European Union Money Laundering Directives Overview |
FIRST EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
The first European Union (EU) Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering (Directive 91/308/EEC),” was adopted by the Council of the European Communities in June 1991.
Like all directives adopted by the Council, it required member states to achieve (by amending national law, if necessary) the specified results. This First European Union Directive required the members to enact legislation to prevent their domestic financial systems from being used for money laundering.
The unique nature of the EU as a “community of states” makes it fundamentally different from other international organizations. The EU can adopt measures that have the force of law even without the approval of the national parliaments of the various member states.
Plus, European law prevails over national law in the case of directives. In this respect, European Union (EU) Directives have far more weight than the voluntary standards issued by groups such as the Basel Committee or FATF. Of course, the Directive applies only to EU member states and not to other countries.
The First European Union Directive of 1991 confined predicate offenses to money laundering to drug trafficking as defined in the 1988 Vienna Convention. However, member states were encouraged to extend the predicate offenses to other crimes.
SECOND EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
In December 2001, the European Union (EU) agreed on a Second Directive (Directive 2001/97/EEC) that amended the first one to require stricter money laundering controls across the continent.
Member states agreed to implement it as national law by June 15, 2003; however, only Denmark, Germany, the Netherlands and Finland met the deadline, with Ireland and Spain complying shortly afterwards. Other member states eventually followed.
The following were the key features of the Second European Union Directive on Money Laundering (ML):
- It extended the scope of the First EU Directive beyond drug-related crimes. The definition of “criminal activity” was expanded to cover not just drug trafficking, but all serious crimes, including corruption and fraud against the financial interests of the European community.
- It explicitly brought bureaux de change and money remittance offices under Anti Money Laundering coverage.
- It clarified that knowledge of criminal conduct can be inferred from objective factual circumstances.
- It provided a more precise definition of money laundering to include:
— Concealing or disguising the nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that the property is derived from criminal activity or from an act of participation in that activity.
— The acquisition, possession or use of property, knowing, when it is received, that it was derived from criminal activity or from an act of participation in the activity.
— Participation in, association to commit, the attempt to commit, and the aiding, abetting, facilitating or counseling the commission of any of the mentioned actions.
- It widened the businesses and professions that are subject to the obligations of the directive. Certain persons, including lawyers when they participate in the movement of money for clients, were required to report to authorities any fact that might indicate money laundering.
The Second European Union Directive was a tremendous step forward because its applicability included many of the important financial centers of the world. It went well beyond similar standards issued by other organizations such as the UN and even FATF.
THIRD EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
A Third European Union (EU) Directive, “Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing, (Directive 2005/60/EC)” based on elements of FATF’s revised 40 Recommendations, was adopted in 2005.
The Third EU Directive was to be implemented by member states by December 15, 2007. While several countries did not meet this original deadline, the directive was eventually implemented by all members. In line with FATF’s anti-money laundering recommendations, the Third European Union Directive on Money Laundering extended the scope of the first and second directives by:
- Defining “money laundering” and “terrorist financing” as separate crimes. The directive’s measures were expanded to cover not only the manipulation of money derived from crime, but also the collection of money or property for terrorist purposes.
- Extending customer identification and suspicious activity reporting obligations to trusts and company service providers, life insurance intermediaries and dealers selling goods for cash payments of more than EUR 15,000.
- Detailing a risk-based approach to customer due diligence. The extent of due diligence that is performed on customers, whether simplified or enhanced, should be dependent on the risk of money laundering or terrorist financing they pose.
- Protecting employees who report suspicions of money laundering or terrorist financing. This provision instructs member states to “do whatever is in their power to prevent employees from being threatened.”
- Requiring all financial institutions to identify and verify the “beneficial owner” of all accounts held by legal entities or persons. “Beneficial owner” refers to the natural person who directly or indirectly controls more than 25 percent of a legal entity or person.
- Credit institutions.
- Financial institutions.
- Auditors, external accountants and tax advisors
- Legal professionals.
- Trust and company service providers.
- Estate agents.
- High value goods dealers who trade in cash over 15,000 Euros.
- Casinos.
- It specifically includes the category of trust and company service providers.
- It covers all dealers trading in goods who trade in cash over EUR 15,000.
- The definition of financial institution includes certain insurance intermediaries.
1. The definition of politically exposed persons (PEPs). The Third defined PEPs as, “natural persons who are or have been entrusted with prominent public functions and the immediate family members, or individuals known to be close associates, of such persons.”
Close associates must be identified only when their relationship with a PEP is publicly known or when the institution suspects there is a relationship. Finally, the commission said persons should not be considered PEPs after one year of not being in a prominent position.
2. The inclusion of lawyers among those who are required to report suspicious activity.
3. The precise role of a “comitology committee.” The European Commission coined the term
“comitology,” which means the EU system that oversees the implementation of acts proposed by the European Commission.
FOURTH EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
The fourth European Union Directive (EU) 2015/849 of the European Parliament and of the Council of 20, May 2015, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, entered into effect on June 26, 2015.
Member states have two years from that date to adapt their national legislations accordingly. This directive repealed the Third EU Directive and its predecessors.
Changes in the Fourth EU Money Laundering Directive include:
- The threshold for entities obliged to report suspicious transactions (i.e., persons trading in goods or carrying out transactions) decreased from EUR 15,000 to EUR 10,000.
- The scope of obliged entities was enlarged from just casinos to all “providers of gambling services.”
- Customer due diligence is to be applied for transfers of funds exceeding EUR 1,000.
- They are adopted new definitions for:
— PEP’s family members and persons known to be close associates.
— Senior management and others.
- Tax crimes relating to direct and indirect taxes are included in the broad definition of ‘criminal activity’, in line with the revised FATF Recommendations.
- An explanation of “financial activity on an occasional or very limited basis” was included.
- The European Commission must submit a report every two years on the findings of the risk assessment of ML and TF affecting the internal Market.
- The European Union (EU) executive is also in charge of identifying third-country jurisdictions having strategic deficiencies with regard to AML and CFT (i.e., “high-risk third countries”).
- Special attention is given to PEPs. In this regard, enhanced due diligence (EDD) should be applied to every PEP whether the individual is a domestic or third-country citizen. The risk these persons pose was extended to 12 months and measures they are subject to must also applied to their family members and their known close associates.
- For groups (and their branches and subsidiaries) this directive sets the criteria for adequate compliance related to third parties for customer due diligence.
- New requirements regarding beneficial ownership information have been introduced, particularly for trusts and similar legal arrangements. Subject to data protection rules, this information must be held in central registers in each member state, and must be made available to competent authorities, financial intelligence units (FIUs), obliged entities, and any person with legitimate interest.
- Data in the statistics relevant to the effectiveness of systems to combat ML and TF were enlarged to include, for instance, size and importance of sectors or the number of cross-border requests for information dealt with by FIUs.
- Obliged entities that are part of a group are required to implement group-wide policies and procedures as well as to take measures proportionate to their risks. Criminals or their associates, convicted in relevant areas, are prevented from holding management functions or indirectly controlling certain obliged entities.
- With regard to penalties for breach of the provisions, the set of administrative sanctions and measures now range from “name and shame” to withdrawal of authorization. Pecuniary sanctions for natural persons are set to at least EUR five million or 10% of the total annual turnover for entities.
- An entire section of the directive is dedicated to the rules for cooperation between member state FIUs, the European Supervisory Authorities (ESAs) and the EU Commission.
- Because it is a directive and not a regulation, this legislative act gives some discretion to member states on the application of the provisions.
- At the national level, the directive requests that member states conduct a Money Laundering and Terrorist Financing risk assessment as well as designate a responsible authority. Moreover, they must ensure that obliged entities take appropriate steps to identify and assess their own risks. Non-exhaustive lists of potentially lower and higher risks are provided for guidance in these risk assessments and are based on:
— Product or service, transaction or delivery channel risk factors, such as low premium insurance policies versus private banking.
— Geographical risk factors, such as member states versus countries subject to sanctions.
FIFTH EUROPEAN UNION DIRECTIVE ON MONEY LAUNDERING:
On June 19th, 2018, the fifth EU Anti-Money Laundering Directive (AMLD 5) was published in the official journal of the European Union. The 5th EU directive on money laundering modifies the fourth Anti-Money Laundering Directive (AMLD4) released only in 2015.
The EU Commission proposed the revised AMLD in July 2016 as part of its Action Plan against terrorism announced in February 2016, after the attacks in Paris and Brussels, and as a reaction to the Panama Papers published in April 2016.
The plan to implement the changes by January 2017 resulted overambitious; a final compromise text was reached only in December 2017. The 5th EU directives on money laundering entered into force on July 9, 2018.
Member states are obliged to transpose the modified regulations into national law by latest January 20, 2020. Particulars are:
- Extends the scope to virtual currency platforms and wallet providers, tax related services and traders of art.
- Grants access to the general public to beneficial ownership information of EU based companies.
- Makes it an obligation to consult the beneficial ownership register when performing AML due diligence.
- Obliges member states to create a list of national public offices and functions that qualify as politically exposed (PEP).
- Introduces strict enhanced due diligence measures for financial flows from high-risk third countries.
- Ends the anonymity of bank and savings accounts, as well as safe deposit boxes and creates central access mechanisms to bank account and safe deposit boxes holder information throughout the EU.
- Makes information on real estate holders centrally available to public authorities
- Lowers thresholds for identifying purchasers of prepaid cards and for the use of e-money
- Further enhances the powers of the FIUs and facilitates cooperation and information exchange among authorities.
1. New service providers in scope:
The fifth European Directives on Money Laundering (AMLD5) will apply to virtual currency exchange service providers and electronic wallet providers in order to cover the risks associated with virtual currencies like bitcoins.
Persons who provide tax related services but are not obliged auditors, accountants or tax advisors will also be in scope of the AMLD5. Furthermore, traders of art will be obliged parties to the extent they trade at values above 10.000 Euros.
2. Public access to beneficial ownership information:
Registers of beneficial ownership information created under the 4th EU directive on money laundering will be made accessible to the general public. The need to demonstrate a legitimate interest for access will be eliminated except for trusts and similar legal arrangements.
In that case access to beneficial ownership information will be granted to any natural or legal person that can demonstrate a legitimate interest as well as to any person filing a request in relation to a trust or similar legal arrangement which holds or controls any corporate or other legal entity.
Access will comprise, as a minimum: the beneficial owner’s month and year of birth, country of residence, nationality, and the nature and extent of the beneficial interest held. Member states must implement mechanisms to ensure that information in those registers is accurate and up to date and apply effective sanctions in cases of breach.
Obliged entities will have to notify the authorities of discrepancies found while conducting customer due diligence (KYC) between the beneficial ownership information on the registers and the beneficial ownership information they hold otherwise.
Beneficial owners will have an explicit obligation to provide the corresponding entities with their beneficial ownership information required for the register. The EU Commission has been tasked to ensure the interconnection of the many registers at EU level by 10 March 2021.
Plans to lower the quorum for the determination of beneficial ownership to 10% for certain passive non-financial entities (PNFE) were not put into practice.
3. Know Your Customer: Obligation to consult beneficial ownership register:
When performing a KYC prior to any new business relationship, obliged parties must in future consult the corresponding beneficial ownership register in the EU. Reasonably, this can only apply once such a register is available and the counterpart is EU based.
4. PEP-Lists:
Member states will be obliged to draft a list of offices and functions that qualify as politically exposed (PEP) on national level and including nationally registered international organizations; the EU will draft a corresponding list on EU level, consolidate the national lists from member states and publish the result. The lists will not name any persons. National as well as EU based PEPs continue to be high risk for the purposes of the KYC, and require enhanced due diligence.
5. Enhanced Due Diligence in respect of high-risk third countries:
Enhanced Due Diligence measures in relation to customers from third countries identified by the EU Commission as presenting an increased risk of money laundering, will be expanded and harmonized.
A new section introduces a set of strict enhanced due diligence measures obliged parties will have to perform. Member states will be entitled to require further measures like the use of bank accounts established in countries with EU or equivalent AML standards, for the first transaction in a business relationship.
Member States may introduce Additional Enhanced Due Diligence, like reporting obligations for financial transactions with counterparts in high risk third countries or limiting the foundation of companies by individuals from high risk third countries or the creation of companies by their own nationals in such high risk third countries.
6. Bank account and safe deposit box regulations:
Anonymous bank accounts, savings accounts or safe deposit boxes will be abolished with the 5th EU directive on money laundering. Member States must create central registries or central electronic data retrieval systems by latest 10 September 2020, which allow the timely identification of any natural or legal person holding or controlling bank or savings accounts and safe deposit boxes.
This information will be directly accessible by financial intelligence units (“FIUs”) and national competent authorities.
7. Access to Information on Holders of Real Estate:
Information on real estate ownership by any natural or legal person will be made centrally available for public authorities; this does not require the creation of a central real estate register. Alternatively, electronic data retrieval systems can be used.
8. Thresholds for Prepaid Cards and E-Money transactions will be lowered:
The threshold for identifying holders of prepaid cards will be further lowered from EUR 250 to EUR 150. E-Money Online transactions with prepaid cards will be limited to max. EUR 50. These amounts can be further lowered by member states, but not increased.
Under 4th EU directive, Member States may allow obliged entities to apply simplified due diligence measures with respect to e-money which meets certain conditions, including threshold amounts. 5th EU directive reduces these amounts and introduces restrictions on anonymous prepaid cards issued in third countries.
9. Measures to enhance the powers of the FIUs:
The rights and competences of national EU Financial Intelligence Units will be extended and the cooperation and exchange of information among FIUs and other relevant institutions further facilitated. For example, FIUs will be allowed access to the centralized bank account information referred to above.
Although the possibility was discussed to lower the threshold for beneficial ownership of certain vehicles (“passive non-financial entities”), it was not made a part of the final 5th EU directive text.
SIXTH EUROPEAN DIRECTIVE ON MONEY LAUNDERING:
By December 2020, the fight against money laundering by the European Parliament will step up a gear as the Sixth Anti-Money Laundering Directive (6AMLD) becomes fully transposed into law across all EU countries. Regulated entities operating within the zone will then have until June 2021 to implement relevant regulations.
It is critical that concerned companies familiarize themselves with 6th EU directive and the implications for compliance processes, as well as the future growth opportunities.
1. A harmonized definition of money laundering offences:
The Directive provides a harmonized definition of money laundering offences, aimed at removing loopholes in weak domestic legislation.
The 22 predicate offences now include cyber crime and environmental crime, a reflection of the changing nature of the threat landscape and shifting priorities within the European Union. To help understand the risk factors and classifications to look out for, compliance officers should familiarize themselves with the 22 predicate offences as listed in the new Directive.
2. Additional money laundering offences: aiding and abetting:
In addition to those converting the proceeds of crime, the scope of money laundering now includes “aiding and abetting”. By including this group of people, often known as “enablers” it will be easier to go after the people who act as accomplices in the money laundering process.
3. Extension of criminal liability to legal persons:
It is not just the individual that can be punished. One of the most significant changes under the new Directive is the extension of criminal liability to legal persons (i.e. companies or partnerships) where they failed to prevent the illegal activity conducted by a ‘directing mind’ within the company.
Even if the criminal activity that generated illicit funds cannot be identified, an individual or legal person can be convicted.
4. Tougher punishments:
Conviction is another area that has been amended in this latest directive. All states will have to set a maximum imprisonment of at least four years for money laundering offences. This is an increase from one year, as it was previously.
Any sentence may be supplemented with ‘effective, proportionate and dissuasive sanctions’ which can be combined with fines. This includes the full shut-down of a business.
Companies would be wise to view compliance as something that can enable rather than hinder business practices. Staying focused on managing the increasingly complex area of compliance with leading data and technology solutions. Innovation is the only way companies and individuals can reduce their risk exposure to the growing threat that is money laundering.
Reference:
1. CAMS Study Guide, 6th Edition
2. http://europa.eu/
3. https://globalcompliancenews.com/eu-5th-anti-money-laundering-directive-published-20180716
4. https://complyadvantage.com/blog/6amld-sixth-anti-money-laundering-directive/
Comments
Post a Comment