The European Union has made a decisive move in the global fight against financial crime by reaching a provisional agreement on a sweeping anti-money laundering package. This legislative milestone, achieved through the collaborative efforts of the European Council and Parliament, is poised to fortify the defenses of EU citizens and the financial system against the pervasive threats of money laundering and terrorist financing.
Belgian Finance Minister Vincent Van Peteghem praised the agreement as a critical component of the EU's enhanced anti-money laundering strategy, emphasizing the goal of leaving no room for criminals to legitimize illicit funds within the financial system.
The new legislative package is a game-changer, transferring all rules pertaining to the private sector into a new regulation, while a directive will address the organization of national anti-money laundering and counter-terrorist financing (AML/CFT) systems within member states.
A Closer Look at the Anti-Money Laundering Regulation
- Broadening the Scope of Obliged Entities: The provisional agreement significantly expands the list of entities required to perform due diligence. Notably, the crypto sector is brought under the regulatory umbrella, with crypto-asset service providers (CASPs) now mandated to conduct due diligence on customer transactions exceeding €1000 and report any suspicious activities. This move acknowledges the growing role of cryptocurrencies in the financial landscape and aims to curb their use in illicit activities.
- Luxury Goods and Professional Sports Scrutiny: The regulation extends its reach to traders dealing in luxury goods, such as precious metals, stones, high-end vehicles, and artwork, recognizing these markets as potential avenues for money laundering. In a novel approach, professional football clubs and agents are also included due to the sector's perceived high risk, although member states retain the flexibility to exempt them if deemed low risk.
- Enhanced Due Diligence Measures: The agreement introduces stringent due diligence measures for cross-border correspondent relationships, especially for CASPs. Financial institutions are required to apply enhanced scrutiny when dealing with high net-worth individuals, recognizing the potential for significant asset movement to mask illicit funds.
- Cash Payment Limits: In a bid to disrupt large-scale cash-based money laundering, the EU has set a maximum limit of €10,000 for cash payments. This cap is designed to make it more challenging for criminals to launder money, while member states have the discretion to impose even stricter limits.
- Beneficial Ownership Clarity: The agreement aims to bring about greater harmonization and transparency regarding beneficial ownership. It sets a 25% threshold for identifying the true controllers of legal entities and tightens rules to prevent individuals from hiding behind complex ownership structures.
- High-Risk Third Countries: Entities will be required to apply enhanced due diligence (EDD) measures to transactions involving countries with AML/CFT deficiencies, ensuring that the EU's internal market remains protected from external risks.
Insights into the Anti-Money Laundering Directive
- Verified Beneficial Ownership Registers: The directive mandates the verification of information submitted to central registers, with a specific call-out for entities associated with sanctioned individuals or entities to be flagged.
- Real Estate Register Accessibility: To aid in criminal investigations involving real estate, the directive ensures that competent authorities have access to comprehensive real estate registers, which will include information on property prices, types, history, and legal encumbrances.
- Empowered Financial Intelligence Units (FIUs): FIUs will gain immediate and direct access to a broad spectrum of financial, administrative, and law enforcement information, bolstering their capacity to prevent, report, and combat money laundering and terrorist financing.
- Risk-Based Supervision: The directive introduces a risk-based approach (RBA) to the supervision of obliged entities, with supervisors required to report suspicious instances to FIUs.
- Comprehensive Risk Assessment: Both the EU Commission and member states will conduct thorough risk assessments, with the Commission providing tailored recommendations to address identified risks.
What's Next?
The provisional agreement's texts are now in the process of being finalized and will soon be presented to the Committee of Permanent Representatives and the European Parliament for their approval. Following their endorsement, the Council and Parliament will formally adopt the legislation, leading to its publication in the EU's Official Journal and subsequent entry into force.
This landmark agreement is a testament to the EU's unwavering commitment to combating financial crime and ensuring a robust, transparent financial environment. As the EU continues to refine its AML/CFT strategies, we can expect to see a more secure financial landscape that is resilient to the machinations of criminals and terrorists alike.
Stay tuned for further updates as this critical legislation progresses towards implementation, marking a new era in the EU's fight against money laundering and terrorist financing.
