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EU Anti-Money Laundering Package is Officially Published
DATE
27 Jun, 2024
Read time
20
Key Aspects
- The European Union's Anti-Money Laundering Package was officially published in the EU Official Journal on 19 June 2024.
- It comprises three key legal documents: the AML Regulation, the AML Directive, and the Anti-Money Laundering Authority (AMLA) Regulation.
- The Directive mandates that entities establish internal policies, procedures, and controls to detect and report suspicious activities, conduct customer due diligence, and create central registers of beneficial ownership, ensuring accessible information.
- Effective from 9 July 2024, Member States must implement necessary legislative provisions by 10 July 2027, with specified derogations for beneficial ownership access.
- The Directive aims to harmonize AML rules across the EU, enhancing transparency and cooperation among financial intelligence units (FIUs) and other authorities.
What Does the “Package” Contain?
On June 19, 2024, the official publication of several significant regulations was made. These include:
- Regulation (EU) 2024/1620 of the European Parliament and of the Council of 31 May 2024 establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism and amending Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010;
- Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing; and
- Directive (EU) 2024/1640 of the European Parliament and of the Council of 31 May 2024 on the mechanisms to be put in place by Member States for the prevention of the use of the financial system for the purposes of money laundering.
The Revised AML Directive
This post will explore the details of the Directive. It enters into force on the twentieth day following its publication in the OJ (9 July 2024). Member States are required to bring into force the laws, regulations, and administrative provisions necessary to comply with the Directive by 10 July 2027 with some derogations for certain articles on the access to beneficial ownership information. As it is characteristic for the EU Directive, it is aimed at regulating matters where national law rules will be needed.
This Directive sets out rules and regulations for financial institutions and other designated entities to prevent money laundering and terrorist financing. It requires these entities to implement internal policies, procedures, and controls to detect and report suspicious activity, and to conduct customer due diligence to verify the identity of their clients. The Directive also establishes a framework for cooperation and information sharing among EU member states' financial intelligence units (FIUs) and other authorities.
Revolutionising Access to Beneficial Ownership Information
Increased transparency of legal entities and legal arrangements: The directive mandates that member states establish central registers of beneficial ownership information for companies, legal entities, trusts, and similar arrangements. The following should be kept in mind: the previous version of the Directive obliges EU Member States to ensure that information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public. The revised rule is such that it obliges Member States to ensure that the information on the beneficial ownership is accessible in all cases to:
(a) competent authorities and FIUs, without any restriction;
(b) obliged entities, within the framework of customer due diligence in accordance with the Directive;
(c) any person or organisation that can demonstrate a legitimate interest.
An important remark here is that those persons should be permitted to access at least the name, the month and year of birth and the country of residence and nationality of the beneficial owner as well as the nature and extent of the beneficial interest held.
Moreover, Member States shall ensure that central register entities verify if beneficial ownership information pertains to persons or entities designated under targeted financial sanctions, both immediately upon designation and at regular intervals. The registers must indicate if a legal entity or arrangement is subject to, controlled by, or has a beneficial owner under targeted financial sanctions (Article 10 (9)).
After a 2022 ruling by the EU Court of Justice restricted public access to registers of beneficial ownership, eight member states initially closed off these registers, citing privacy concerns. However, varying approaches emerged among these states, with some eventually allowing limited access while others maintained strict restrictions. The lack of consistency highlighted the need for a unified system across the EU. The new Directive now mandates broad access to beneficial ownership information, ensuring transparency while standardizing access procedures and empowering entities involved in anti-money laundering efforts to scrutinize ownership details without discrimination based on location.
Additional Noteworthy Provisions
Enhanced due diligence for high-risk third countries: The Directive requires financial institutions and other designated entities to apply enhanced due diligence measures when dealing with customers or transactions that involve countries that have been identified as high-risk for money laundering or terrorist financing (Article 26).
Enhanced powers for FIUs: The directive strengthens the powers of FIUs and promotes better cooperation between them. It mandates that member states provide their FIUs with the necessary resources and independence to perform their functions effectively. For example, Article 21 of the Directive states that the Member States shall ensure that FIUs have access to the information that they require to fulfill their tasks, including financial, administrative and law enforcement information. Such information includes among other immediate and direct access to information contained in commercial databases, including business and company registers and databases of politically exposed persons.
Criminalization of Money Laundering: The directive requires Member States to ensure that obliged entities can be held liable for breaches of AML Regulation and Regulation 2023/1113 on information accompanying transfers of funds and certain crypto-assets. The should, therefore, establish rules for financial sanctions and administrative measures. These sanctions and measures must be effective, proportionate, and dissuasive.
If a Member State's legal system doesn't allow for administrative sanctions, the supervisor can initiate pecuniary sanctions, which must then be imposed by a judicial authority. These sanctions must be equally effective and have an equivalent impact as those imposed by supervisors.
By July 10, 2026, AMLA will issue guidelines on the base amounts for pecuniary sanctions relative to turnover, categorized by type of breach and category of obliged entities.
Interestingly, for credit and financial institutions, Member States must ensure the following pecuniary sanctions can be imposed:
- For legal entities: maximum sanctions of at least EUR 10,000,000 or 10% of the total annual turnover, whichever is higher. For entities under a parent company, the turnover is based on consolidated accounts.
- For natural persons: maximum sanctions of at least EUR 5,000,000.
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