On 20 July 2021, the European Commission issued its AML EU Package which defines a set of concrete measures aiming to further improve compliance by all with AML/CFT rules within the EU and constitutes a single European rulebook.
The EU AML package includes four legislative proposals:
1/Draft Regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism, “AMLA” or the Authority.
Points to be highlighted:
- New supervisory authority for AML in the financial sector, taking over the role currently played by the European Banking Authority, EBA.
- Direct oversight on Member States and local regulators
- Ensuring proper implementation of AML/CFT rules by the issuance of guidelines and regulatory technical standards, RTS.
2/Draft Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing:
The 4th AML Directive n°2015/849 issued on 2015 as amended by the 5th AML Directive n°2018/843 on 2018 both (transposed in Luxembourg national law) constitute the last AML framework in place on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
By issuing a regulation being directly and immediately applicable, the objective of the Commission has been to remove the possibility of differences in the application in the Member States due to divergences in transposition.
Furthermore, the AMLA ensures the proper implementation and application of the AML rules highlighted as follows:
Points to be highlighted:
- Expand list of obliged entities to crypto-asset service providers crowdfunding platforms and migration operators.
- Consistent application in relation to internal policies, controls, and procedures and Group-wide requirements.
- Harmonisation of customer due diligence rules: new requirements on CDD performed on merchants; technological developments and electronic identification; review of existing clients and frequency and update of risk variables, lower risk factors and higher risk factors.
- Obligation to take into consideration proliferation financing related targeted financial sanctions.
- Provisions remain the same on high risk third countries list issued by the Commission, in line with FATF Statements and including any other third country a threat to the Union’s financial system.
- Politically exposed persons defined as persons entrusted with prominent public functions, slightly different definition. Issuance by the Commission of a single list of all prominent public functions based on national lists provided by the Member States and prominent functions at the level of the Union.
- Provisions detailing third party reliance and outsourcing on the CDD duties.
- Beneficial ownership transparency: harmonised beneficial ownership rules, including two tests to be performed in parallel: of control through an ownership interest and of control via other means; new requirements in relation to nominees arrangements (i.e. nominee shareholders and nominee directorship) and obligation to identify the BO in foreign legal entities and express trusts or similar legal arrangement, incorporated or/an administered outside the Union but doing business, including the acquisition of real estate in the European Union.
- Sanctions for BO identification breaches.
- Provisions remain the same on reporting of suspicious transactions, red flags raising suspicion, disclosure requirements. STR template to be issued by the AMLA.
- EU data protection rules requirements for the processing of certain categories of personal data and a shorter time-limit provided for retention of personal data.
- Type of bearer instruments and anonymous instruments use prohibited and limits on the use of cash for large transactions.
3/6th Directive on AML/CFT (“AMLD6”)
Replacing the existing 5th AML Directive 2015/849/EU, includes provisions relating rules on national supervisors and Financial Intelligence Units in the Member States.
4/Revised version of the Regulation on transfers of funds (Regulation n°2015/847/EU) to trace transfers of crypto assets.
Dedicated regulation on crypto assets supporting a level playing field in the Union and already subject to regulatory requirements in other countries, outside the Union.
Regulation in line with FATF Recommendation 15 on new technologies; includes information requirements accompanying transfers of funds and aims more transparency on originator and beneficiaries.
Once voted and agreed, the Draft Regulations on AML/CFT are directly applicable in the Member States and the 6th AML Directive must be transposed.
This legislative package is under discussion in the European Parliament and the Council and will impact the Luxembourg AML/CFT framework.
To be continued…