EU Anti-Money Laundering Directive update


EU Parliament and Council: Agreement on Anti-Money Laundering Directive

At a meeting on the 27th January 2014 the European Parliament and the Council jointly formalised an agreement on the Fourth Anti-Money Laundering Directive. The agreement has been endorsed by the Economic and Monetary Affairs and Civil Liberties committees.

The aim of the Fourth AML Directive is to enhance the ability of authorities to fight money laundering, tax offences and the financing of terrorist activity. The Directive will also introduce new measures to improve the ability to trace the transfer of funds. Furthermore, professionals, including accountants, auditors, bankers, lawyers, real estate agents, will be required to increase their vigilance and report any suspicious transactions by their clients.

Under the draft Directive, EU member states will be compelled to maintain a register of beneficial interests, in which information on the ultimate beneficial owners of corporate and other legal entities, and trusts and foundations will be recorded. One of the principal drivers of the directive is to identify the actual beneficiaries of trusts and foundations, which are considered in certain quarters to be extremely opaque.

The central registers will be open to unrestricted inspection by government authorities, their financial intelligence units and ‘obliged entities’ which includes, for example, banks completing customer due diligence. Inspection by members of the public will be permitted, subject to online registration and the payment of a fee. However, access will be limited to those individuals who are able to establish a ‘legitimate interest or justification’ to be provided with the information requested. Providing the criteria are satisfied applications it is expected that requested will, principally, be accepted from banks and other professionals, including media (investigative journalists), concerning suspected money laundering transactions, corruption, tax fraud and terrorist financing.

A special regime will apply to trusts, where access to the registers will be much more limited; only accessible to authorities and entities that are subject to legal obligations, banks for example. The limitation was included as a result of the insistence of the UK, where trusts commonly arise on the purchase of jointly owned property or on succession. The UK considered that there was a risk that the register could become a register of the entire population of the UK.  Initial resistance to the UK’s position was compromised, as objectors considered the register represented a major step against the use of trusts which despite the many legitimate uses of trusts they considered to be at the heart of tax evasion schemes and by organised crime, both in Europe and the developing world.

Changes will also be introduced on draft ‘transfer of funds’ regulations, with the aim of improving the traceability of payers and payees and their assets. Other changes include new rules to clarify the obligations affecting high risk relationships with ‘politically-exposed persons’, including additional measures to establish the individual’s source of wealth and the source of funds.

The draft Directive is expected to be further considered by the European Parliament and the Council of Ministers in March or April this year and when finally approved, EU member states will have two years to implement the Directive’s provisions.