As part of the increasing efforts to strengthen the capacity of the European Union to combat money laundering and terrorism financing (“AML/CFT”), on January 18th, 2024, the Council and the Parliament adopted a provisional agreement to protect EU citizens and the EU’s financial system, with the following fundamental objectives of the so called “AML Package”:
- to shift all existing AML/CFT rules applying to the private sector to a new regulation;
- to make such rules more stringent and harmonize them among Member States, in order to eliminate possible loopholes which may be used to launder illicit proceeds or finance terrorism.
Such objectives will be realized through:
- The new AML regulation (“AMLR”) on AML/CFT which will set uniform rules for all obliged entities; and
- The new AML Directive ( the “6th Anti -Money Laundering Directive” or “AMLD6”) which will establish the mechanisms that EU Member States should put in place for AML/CFT purposes and repeal the EU Fourth AML Directive.
1. THE NEW EU AML REGULATION: MAIN POINTS
a) Obliged Entities:
The provisional agreement expands the list of obliged entities to three new categories:
- CASPs (Crypto Asset Service Providers): All CASPs will be required to conduct AML due diligence on their clients and will be subject to the relevant AML obligations. Further, CASPs will be obliged to apply customer due diligence measures when executing transactions of €1000 or more.
- Luxury Goods Traders: Traders of luxury goods also shall be bound to perform customer due diligence and AML reporting obligations. Luxury Goods include: precious metals, precious stones, jewelers, horologists and goldsmiths, luxury cars, airplanes, yachts and artworks.
- Professional Football Clubs and Agents: Also this area is intended to be included among the obliged subjects, considering the high risks of Money Laundering. However, the Council pointed out that in the football business, the risks are subject to wide variations; hence, Member States should be granted the option to remove them from the list if they represent a low risk.
b) Enhanced Due Diligence Obligations
Specific enhanced due diligence (EDD) measures will be introduced for:
(i) cross-border correspondent relationships for CASPs; and
(ii) credit and financial institutions’ business relationships with HNW individuals involving a large amount of assets.
Failure to apply EDD measures will constitute an aggravating factor for sanctioning regime purposes.
c) Cash Payment
For the first time, an EU-wide maximum limit of €10,000 for cash payments will be introduced. Member States shall be granted the option to set a lower maximum limit.
Further, obliged entities will need to identify and verify the identity of a person who carries out an occasional transaction in cash between €3,000 and €10,000.
d) Beneficial Ownership
Harmonization and transparency of the rules on beneficial ownership shall be increased.
The agreement points out that beneficial ownership is composed of two elements (ownership and control) which will need to be assessed in order to identify all the beneficial owners of that legal entity or across types of entities, including non-EU entities having business in the EU or purchasing real estate in the EU.
The beneficial ownership threshold is set at 25 percent.
The agreement further includes:
– other rules relating to multi-layered ownership and control structures
– data protection and record retention provisions;
– registration of the beneficial ownership of all foreign entities that own real estate with retroactivity to January 1, 2014.
e) High-Risk Third Countries
Obliged entities shall apply enhanced due diligence measures to occasional transactions and business relationships involving high-risk third countries (considering their national AML/CFT regimes) representing a threat to the integrity of the EU’s internal market.
The European Commission will make an assessment of the risk, based on the listings of the Financial Action Task Force (FATF).
The high level of risk will justify the application of additional specific EU or national countermeasures.
2. THE NEW EU AML DIRECTIVE: MAIN POINTS
a) Beneficial Ownership Registers
The information submitted to each EU Member State’s central register shall be verified. Further, each beneficial register shall flag entities or arrangements associated with persons or entities subject to targeted financial sanctions.
According to the proposed text of the Directive, the entities in charge of the registers will have the power to carry out inspections at the premises of legal entities registered, in case of doubts regarding the accuracy of the information in their possession.
The agreement also establishes that in addition to supervisory and public authorities and obliged entities, among others, persons of the public with legitimate interest, including press and civil society, may access the registers.
The directive also provides that in order to facilitate investigations involving criminal schemes on real estate, real estate registers shall be accessible to competent authorities through a single access point, rendering available all important data such as price, property, encumbrances and property rights, judicial decisions etc
b) Financial intelligence Units (FIUs)
According to the provisional agreement, national FIUs will obtain immediate and direct access to financial, administrative and law enforcement information including information on tax, funds, assets frozen pursuant to targeted financial sanctions, transfers of funds, crypto-transfers, national motor vehicles, aircraft and watercraft registers, customs data, national weapons and arms registers etc
In cross border cases, FIUs will cooperate more closely with the other FIUs of the concerned Member State with the suspicious activity report.
c) Supervising Authorities
Each Member State shall ensure that all obliged entities established in its territory are subject to adequate and effective supervision by one or more supervisors. The supervisors shall apply a risk-based approach and report to the FIUs all results in case of suspicion.
New supervisory measures for the “non-financial sector” will be introduced (i.e., AML/CFT “supervisory colleges”). The new EU AML/CFT authority, “AMLA” will be in charge of drafting regulatory technical standards on the general conditions enabling the functioning of the supervisory colleges.
The final text of the Regulation and of the Directive is now being finalized and will be presented for approval to Member States’ representatives in the Committee of the Permanent Representatives of the Governments of the Member States to the European Union and the European Parliament.
Following the approval, the Council and the Parliament will adopt the relevant texts and they will be published in the EU’s Official Journal.