European Parliament Approved the Introduction of Stricter AML Rules

On March 27, members of the European Parliament’s committees on economic and monetary issues and committees on civil liberties, justice and internal affairs adopted an updated position on the financial provisions of the EU policy in the field of combating money laundering and terrorist financing. The position is formalized in the following documents:

1) “Single Rulebook” – regulation on due diligence of customers, transparency of beneficial owners and use of anonymous tools (crypto-assets) and crowdfunding platforms. It also contains provisions on “golden” passports and visas.

2) 6th Anti-Money Laundering Directive, containing national provisions on supervision and financial intelligence units, as well as on access to registers of beneficial owners and assets held in free zones by competent authorities.

3) Regulation on the establishment of the European Anti-Money Laundering Authority (AMLA), its supervisory and investigative powers.

Prevention of Money Laundering and Terrorist Financing

High-level organizations (banks, asset and crypto-asset managers, real estate and virtual real estate agents, etc.) will be required to verify the identity of their customers, their ownership and the controlling persons of the company. They will also have to establish the detailed types of money laundering and terrorist financing risks in their area of activity and report the relevant information to the central register.

To limit cash and crypto-asset transactions, MEPs suggest cutting the payments that can be accepted by persons providing goods or services to €7,000 for cash payments and €1,000 for crypto-asset transfers when the customer cannot be identified.

It is expected a ban will be imposed on any schemes for obtaining citizenship by investment (“golden passports”), and the controls against money laundering by obtaining a residence permit through investments (“golden visas”) will be introduced.

Financial Intelligence Units

Each member state must establish a financial intelligence unit (FIU) to prevent, report and combat money laundering and terrorist financing. FIUs should exchange information among themselves and with competent authorities.

Beneficial Ownership Information

National FIUs and other competent authorities should have access to information on beneficial ownership, bank accounts, land or real estate registers. MEPs are proposing that member states collect ownership information on goods such as yachts, planes and cars worth more than €200,000, or goods kept in free zones.

Beneficial ownership is defined as having 15% plus one share, or voting rights, or other direct or indirect ownership interest, or 5% plus one share in an extractive industry or company for which there is a more obvious risk of money laundering or terrorist financing.

Beneficial Ownership Registers

Beneficial ownership information held in national central registers must be available digitally in an official EU language and in English and include current and historical information for a specified period. The entity responsible for maintaining the central register will have the right to request from corporate and legal entities any information necessary to identify and verify their beneficial owners.

Public Access to Information

It was decided that persons with a legitimate interest, such as journalists, reporters, any other mass media, civil society organizations, higher education institutions, should have access to the register, including interconnected central registries. Their will gain access for at least two and a half years. Member countries will automatically continue access, but will also revoke or suspend access in the event of abuse.

Activities of AMLA

AMLA will monitor risks and threats within and outside the EU and directly supervise specific credit and financial institutions, classifying them according to the level of risk. It will initially oversee 40 organizations with the highest residual risk profile present in at least two member states. Each Member State shall present at least one such organization.

In order to carry out its duties, the AMLA may compel companies and individuals to hand over documents and other information, conduct site visits with judicial authorization and impose sanctions ranging from €500,000 to €2 million (0.5-1% of annual turnover), for significant violations – up to 10% of the total annual turnover for the previous business year.

MEPs also intend to provide AMLA with the power to mediate between national financial supervisory authorities and settle disputes, supervise and investigate the national implementation of uniform anti-money laundering rules, and ensure enhanced supervision of supervisory authorities in the non-financial sector.

Next Steps

Negotiations on the adoption of a new package of the above provisions will begin in April.

Sources:

European Parliament press release

6th Anti-Money Laundering Directive (draft)

Regulation on the establishment of AMLA (draft)