On April 19th 2018, the European Parliament announced it had adopted the new directive which will amend the 4th AML Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorism financing. This new directive (the 5th AML Directive) is part of the European Commission's Action Plan of February 2nd 2016 in response to the recent terror attacks in Europe and the Panama papers revelations. The 5th AML Directive was published in the Official Journal of the European Union on June 19th 2018 and entered into force on July 10th 2018. Member States must comply with this directive by January 10th 2020.
The new directive is not a replacement of the existing framework but rather amends the 4th AML Directive in order to better counter terrorism financing and increase transparency.
There will now be a “clear rule of public access” to beneficial ownership with registers becoming publicly available. Those who can demonstrate a legitimate interest will have access to registers of beneficial ownerships of trusts. These registers will be interconnected to ensure cooperation between Member States to facilitate the fight against anti-money laundering.
The European Commission had initially proposed to lower the threshold above which it is necessary to identify beneficial owners of certain corporate entities from 25% plus one share to 10% but this amendment was finally not adopted in the5th AML Directive.
Member States will have to set up a national register of bank and payment accounts or data retrieval system which will require the name of the account holder. Access to such information will be limited to Financial Intelligence Units (“FIUs”) and national competent authorities.
The powers of the EU Financial Intelligence Units have been extended in order to ensure their access to information in a timely and efficient manner. The cooperation between FIUs and Member States’ financial supervisory authorities will also be enhanced.
The 5th AML Directive has extended the scope of AML rules to include anonymous prepaid cards, providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers. As a result, entities providing these services will be required to apply customer due diligence controls. It has been extended further to include estate agents (but only in relation to transactions where monthly rent amounts to EUR 10,000 or more), traders of art or intermediaries in trade of works of art and also persons who give advice on tax matters.
The threshold with respect to electronic money and prepaid instruments in which Member States may exempt obliged entities from due diligence measures has been lowered from a monthly transaction limit of EUR 250 to EUR 150. Furthermore, a new derogation to the exemption has been introduced for remote payment transactions where the amount exceeds EUR 50.
Article 13(1) of the Directive now permits identification of beneficial owners or customers via electronic identification enabling verification remotely. This process must be approved and regulated by the relevant national authorities.
Enhanced customer due diligence measures will also apply in the context of transactions involving high-risk third countries. There will now be a minimum set of enhanced customer due diligence measures to be applied in these circumstances. This will strengthen the monitoring of these transactions and improve safeguards in order to combat terrorist financing.