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The European Council has agreed its position on the new single rulebook for anti-money laundering (AML) as Brussels reels from the transparency register court ruling.
To enlarge the scope of the existing regulatory framework and to close possible loopholes, the Council has agreed its position on an AML regulation and a 6th Anti-Money Laundering Directive (6th AMLD).
Together with the proposal for a recast of the transfer of funds regulation, on which an agreement has already been reached with the European Parliament, these will form the new EU AML rulebook once adopted.
“Terrorists and those who finance them are not welcome in Europe,” said Zbyněk Stanjura, the Czech Republic’s finance minister. “In order to launder dirty money, criminal individuals and organisations had to look for loopholes in our existing rules which are already quite strict.”
“But our intention is to close these loopholes further and to apply even stricter rules in all EU member states.”
Through the new changes, large cash payments beyond €10,000 will become impossible in the trading bloc and trying to stay anonymous when buying or selling crypto-assets will also become more difficult.
New rules oblige that crypto-asset service providers (CASPs) must conduct due diligence on their customers. This means that they will have to verify facts and information about their customers.
In its position, the Council demands CASPs to apply customer due diligence measures when carrying out transactions amounting to €1,000 or more, and adds measures to mitigate risks in relation to transactions with self-hosted wallets.
The Council also introduced specific enhanced due diligence measures for cross-border correspondent relationships for crypto-asset service providers.
Meanwhile, third-party financing intermediaries, persons trading in precious metals, precious stones and cultural goods will also be subject to the obligations of the regulation, as will jewellers, horologists and goldsmiths.
Third-party countries that are greylisted by the Financial Action Task Force (FATF), which includes potential future EU member state Albania, as well as financial hubs like the United Arab Emirates, will also be similarly listed by the EU.
There will accordingly be two EU lists, a “blacklist” and a “greylist”, reflecting the FATF listings.
The European Commission will not be required to redo the identification process performed by FATF, which is to ensure that FATF lists are transcribed in a timely manner and to avoid wasting resources.
Once a third country appears on one of these lists, the EU will apply measures proportionate to the risks posed by the country.
In its position, the Council also decided to make beneficial ownership rules more transparent and to harmonise them more.
In particular, ministers have clarified that beneficial ownership rules are based on two components — ownership and control. These need to be analysed to assess how control is exercised over a legal entity and to identify all natural persons who are the beneficial owners of that legal entity.
Related rules applicable to multi-layered ownership and control structures have also been clarified.
Beneficial ownership
The Council also spells out further how to identify and verify the identity of beneficial owners across types of entities, including non-EU entities, with data protection and record retention provisions also clarified.
The Council has also said that member states should ensure that any natural or legal person that can demonstrate a legitimate interest has access to information held in the beneficial ownership registers. Such persons should include those journalists and civil society organisations that are connected with the prevention and combating of money laundering and terrorist financing.
The latter appears to be in response to the recent ruling regarding beneficial ownership rules. Last month, the Court of Justice of the European Union ruled that the provision in the EU’s 4th Anti-Money Laundering Directive (4th AMLD) that makes information about beneficial owners public is invalid and contradicts the European right to a private life.
Members of the European Parliament (MEPs), who will now need to negotiate the new rules with the European Council, said that the ruling “surprised” them.
“Beneficial ownership registers are an essential tool in the fight against money laundering and terrorist financing, making money laundering less easy to hide and enabling authorities to act in a swifter way,” said the joint statement from MEPs Luděk Niedermayer and Paul Tang, who are co-rapporteurs for the legislation.
“Next to that, those registers play an important part in ensuring compliance with existing rules, such as the obligation of know your customer checks and corporate due diligence procedures.”
It is of key importance that the access to those registers for competent authorities and financial intelligence units (FIUs) is not affected, the MEPs stressed.
“It appears the reaction of some authorities to go beyond the judgement, by closing registers even for obliged entities or for updating information, is thus unjustified,” the statement says.
“Worse, it can harm the ability of member states’ authorities to effectively tackle money laundering and terrorist financing.
“As co-rapporteurs, we strongly believe that limiting the access for competent authorities and obliged entities even for a limited period of time would lead to a substantial risk of an uptake of money-laundering.”
The MEPs have now said that they are ready to work with the Council on this matter, and that they envision that there will be a vote in the European Parliament on its position in mid-March 2023.
