The Directive (EU) 2015/849 of 20 May 2015, the so-called 4th anti-money laundering directive (4th AML Directive) was enacted on 25 June 2015. With a two-year window for implementation, this Directive was due to be completed by 26 June 2017 at the latest.
While some Member States are still in the process of implementing the 4th AML Directive in their national regulations, other countries (e.g. Germany, England, Sweden, Belgium and Denmark) have already introduced local regulations in this respect.
What’s new in this Directive?
- Emphasis on ultimate beneficial ownership (UBO) and enhanced customer due diligence
- Enhanced risk-based approach, requiring evidence-based measures
- The introduction of the UBO register, which should lead to more transparency in the identification of the UBOs
- Expanded definition of politically exposed persons (PEPs).
- Broadened scope of the due diligence requirements.
- The risk assessment must at least consider the purpose of the relationship, the size of the transaction and the regularity or duration of the business relationship.
Because the 4th AML Directive gives certain freedom to the Member States for this implementation, we see a fragmented picture in Europe. Each Member State has its own regime, which doesn’t add up to legal certainty and creates ambiguity.
Zooming in on the Netherlands
On 6 March 2018, the House of Representatives in the Netherlands adopted the draft revision Anti-Money Laundering and Anti-Terrorist Financing Act (WWFT 2018). The next step is the Senate, which is scheduled for this April.
So, what are the main changes in the WWFT 2018?
- The scope of the WWFT is being extended with respect to sellers of goods, gambling and lottery activities.
- More compelling obligation to draw up a risk assessment, which should be kept up-to-date. Not only the client itself should be assessed, also the involved countries and geographical regions of its operations, why certain services are requested.
- Significant decrease of situations when ‘simplified’ customer due diligence is sufficient (only with low risk). Nevertheless, transactions need to be monitored to detect any unusual or suspicious transaction.
- No distinction between domestic and foreign PEPs. This results in a more stringent customer due diligence.
- The definition of UBO can apply to persons with certain percentage of shares, (in)direct ownership via shares, but also via voting rights. In addition, persons within senior management can also be considered as UBOs.
- All UBOs must be registered in a national UBO register.
- Consistent and adequate enforcement instruments for the supervisory authorities, such as amended maximum fines and the possibility to revoke licenses
- Publication of all decisions by the supervisory authorities regarding administrative fines and other measures.
- The Financial Intelligence Unit (FIU) is given the authority to request information about a specific client and/or transaction to all institutions instead, and not just the ones that reported an unusual transaction.
Zooming in on Luxembourg
Most of the 4th AML Directive will be implemented in bill no. 7128. This bill amends the AML law of 12 November 2004. The Luxembourg parliament has adopted the bill in February and it will become effective after publication. There will be no transition period.
Part of the 4th AML Directive has been implemented via 4 other bills, being:
- The tax reform law of 23 December 2016, criminal tax offences were added to the list of money laundering offences.
- Bill no. 7208 of 8 November 2017, tax authorities shall be granted access to certain documents and information.
- Bill no. 7216 of 6 December 2017, with respect to a register of trusts;
- Bill no. 7217 of 6 December 2017, with respect to the UBO register.
Action needed: Enhanced due diligence – also for accountancy and law firms!
Complying with new legislation might be easier for certain sectors than others. For example, banks, corporate services providers, and trust companies, they are already used to having certain procedures in place.
But for some sectors this enhanced due diligence is new – and while previously they could get away with the more simplified customer due diligence, they are now also required to professionalize their procedures.
Never a dull moment
The 4th AML Directive was the most sweeping AML regulation of the EU in years. And while the 4th AML Directive is not even implemented in all Member States, the EU is already discussing it in making it stricter.
A 5th AML Directive? To be continued…