Topic Anti-money laundering Money laundering: New directive soon to enter into force
In late April, the European Parliament approved the draft directive to amend the EU’s Fourth Money Laundering Directive by a large majority. As soon as the Council has formally consented to the text as agreed in the trilogue, the amending directive can enter into force following its publication in the Official Journal of the European Union.
The draft directive originated in a European Commission action plan from February 2016 in which the Commission swiftly targeted deficiencies in the fight against terrorist financing after the Paris and Brussels attacks.
Account register and account data retrieval system
From a German perspective, one of the important aspects of the amending directive is the new obligation for all member states to set up an account register or an account data retrieval system.
Germany and BaFin, where an automated account information access procedure has existed since 2003, served as a prototype here.
Curbing the misuse of anonymous means of payment
Furthermore, the directive will curb the misuse of anonymous means of payment for terrorist financing, while avoiding unduly curtailing the legitimate interests in using anonymous means of payment. For one thing, the legal provisions on money laundering will also apply to exchange platforms and “wallet providers” for virtual currencies such as Bitcoin – i.e. electronic platforms where users can store credit and use it to pay for goods and services on the internet. This is in line with the approach BaFin adopted by defining tokens and virtual currencies as financial instruments (see expert article on the BaFin website dated 29 March 2018 ).
In addition, the threshold beyond which customer identification is required when prepaid electronic money cards are used is being lowered from €250 to €150. Germany already operates a threshold of just €100.
High-risk third countries
The directive also sets out minimum measures that member states should introduce with respect to high-risk third countries, insofar as such measures are not already in place. The primary aim of these measures is to reinforce client due diligence requirements.
This is important because a harmonised treatment of these countries at EU level enhances the effectiveness of the list of high-risk states compiled by the Commission.
Exchange of information
Furthermore, the directive provides a clear legal basis for the exchange of information between the authorities that are responsible for supervising money laundering and solvency – including the European Central Bank.
This is to be welcomed as it improves the exchange of information and thereby supervision as a whole. The case of the failed Latvian bank ABLV shows that disregarding requirements under money laundering law can also result in insolvency risk.
Finally it should be noted that access to the “transparency register” of legal persons and other associations – a register that contains data on beneficial owners – must in future be open to the public. Certain kinds of trusts are exempted, however, as are cases where public access to this information might expose a beneficial owner to considerable damage or where people who deserve special protection, such as minors, are concerned.
The directive provides a specific timetable for interlinking national transparency registers across the EU. This is a very important step towards better access to this information in cross-border situations and in combating money laundering and tax crime.
Politically exposed persons
With regard to the treatment of politically exposed persons, however, the rules of the fourth Money Laundering Directive, which were implemented in Germany in the middle of last year with the introduction of the new Money Laundering Act (Geldwäschegesetz – GwG - only available in German), remain unchanged (see expert article on the BaFin website dated 15 March 2017). These rules will be reviewed in two years’ time on the basis of a revision clause.
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