Updated: Jan 14, 2020
The European Commission notes on its website that the traceability of financial information has an important deterrent effect, and that it is essential for gatekeepers, such as banks and other obligated entities, to apply measures to prevent money laundering and terrorist financing. In that regard, the EU adopted the first anti-money laundering directive in 1990 in order to prevent the misuse of the financial system for the purpose of money laundering. Since then, the directive has been updated several times in order to address emerging and ongoing issues.
Now in its fifth iteration, and revising its predecessors, the 5th Anti-Money Laundering Directive (AMLD5) is part of an action plan to strengthen EU rules to prevent money laundering and terrorist financing. It was officially adopted by the European Parliament and entered into force on July 9, 2018, and must be implemented into the national law of EU Member States by January 10, 2020.
Below are nine key measures of the revised directive:
Greater transparency on the true owners of companies. Beneficial ownership registries for legal entities will be accessible to the public.
Greater transparency on the true owners of trusts. Access to data on the beneficial owners of trusts will be accessible to competent authorities, Financial Intelligence Units (FIUs), professional sectors subject to anti-money laundering (AML) regulations (such as banks and attorneys), and other persons who can demonstrate a legitimate interest.
Interconnection of beneficial ownership registers among EU Member States. The beneficial ownership registers of Member States will be interconnected in order to facilitate the exchange of information. Additionally, Member States will be required to implement verification mechanisms to improve the accuracy and reliability of the beneficial ownership information collected.
Removal of anonymity from electronic money products (prepaid cards). The anonymous use of electronic money products will only be permitted in the following two cases: (1) Direct use of the prepaid card/instrument in the store for a maximum amount of EUR 150; and (2) Online transactions with a prepaid card/instrument below EUR 50.
Extension of AML and counter terrorism financing rules to virtual currencies, tax-related services, and art dealers. These newly added businesses will be required to identify their customers and report suspicious activity.
Broadened criteria for the assessment of high-risk third countries and enhanced controls on financial transactions involving these countries. Member states will have to assess high-risk third countries, including beneficial ownership, under new and enhanced criteria.
Centralized bank account registers/retrieval systems. Member states will have to set up centralized bank account registers or retrieval systems to identify holders of bank and payment accounts.
Enhanced powers of EU Financial Intelligence Units. FIUs will have greater access to information through centralized bank and payment account registers or data retrieval systems and will be able to cooperate more easily with other EU FIUs as well as other authorities.
Enhanced cooperation between financial supervisory authorities. The revised directive will further the exchange of information and cooperation among money laundering supervisors and supervisory authorities, including with the European Central Bank.
Ongoing illicit activity was a catalyst for the passage of AMLD5, demonstrating the EU's commitment to combatting financial crime and terrorism. With its expanded scope, which now includes crypto currencies and custodian wallet providers, estate agents and rental intermediaries, and art dealers, as well as an increased emphasis on transparency around ultimate beneficial ownership of complex corporate structures, the directive is expected to have significant impact.
To read more about AMLD5 and the prevention of money laundering and terrorist financing across the EU, see the European Commission's website here: https://ec.europa.eu/info/policies/justice-and-fundamental-rights/criminal-justice/anti-money-laundering-and-counter-terrorist-financing_en