ESMA Regulation - Anti-Money Laundering Directive IV

From MarketsReformWiki
Jump to: navigation, search
Anti-Money Laundering Directive IV
Directive Passed Directive in Effect National Laws in Place By
May 20th, 2015 TBA TBA

Anti-Money Laundering Directive IV (AMLD IV) was passed by the European Parliament on May 20th. 2015. The new AMLD seeks to implement the latest recommendations by the Financial Action Task Force to prevent the financial system from being used by criminals, terrorists, and rogue states.[1]

Background

AMLD IV is the fourth AMLD to be passed by both the European Commission and European Parliament. Seeking to address short comings in the current law, the new law takes new measures to prevent money laundering. It is the implantation of the Financial Action Task Force latest set of recommendations. They were published in 2012, with the key points being adoption of risk based approach, greater transparency, and greater international cooperation.

Major Changes

The new AMLD overhauls many areas of AML law in the European Union. Covering multiple classes of persons and businesses, it changes policies on a variety of areas.

Covered Institutions

The directive covers the following:

  • Credit Institutions
  • Financial Institutions
  • Lawyers, Accounts, Notaries, and Tax Advisers
  • Real Estate Agents
  • Legal Persons dealing with cash transactions of €10,000
  • Casinos

Politically Exposed Persons

A major change under the new AMLD is the inclusion of domestic politicians in the politically exposed persons regime. Additionally, the regime will cover individuals in charge of international organizations such as FIFA, WTO, or the United Nations. Lists of Politically Exposed Persons will be created and maintained by each member-state but shall not be considered exhaustive. "Obliged Entities" will still need to conduct risk analysis of clients. [2]

Simplified Customer Due Diligence

AMLD IV changes Simplified Customer Due Diligence (SCDD) procedures. Under the new directive, exemptions are not immediately granted by being a regulated entity like a financial institution. Before SCDD rules are applied, the directive obliges companies to undertake a risk assessment before entering into a business arrangement or transaction. It also ends third country white listing.[3]

Beneficial Ownership Registration

AMLD IV includes a controversial mandate for member states to maintain lists of beneficial owners of companies and trusts. Under the requirement, the only entities that shall be able to access these registries will be competent national authorities such as the FCA and "obliged entities" (legal persons falling under the directive).

Organizational Requirements

The new directive creates the the following requirements:

  • Designation of a compliance officer
  • An independent audit function
  • If a covered entity has branch in a third country location that does not meet the standards of the EU, it may be forced to by competent authorities to close the branch to avoid sanctions if the country does not permit EU level AML standards[4]

Record Keeping Requirements

The record requirements introduced on customer due diligence is that records pertaining to it must be kept up to 5 years. Additionally, member-states may impose record keeping requirements of up to 10 years on CDD records. [5]

Sanctions

National authorities may impose sanctions on "obliged entities", or legal persons covered by the directive. These include:

  • Public statement detailing of breach of AML procedure
  • Revocation of licenses
  • Cease and desist orders
  • Fines of up to 10% of turnover for companies, up to €5,000,000 for natural persons[6]

AMLD IV as it was Passed by the European Parliament


References

  1. AMLD IV: Prove you’re doing it right. Banking Tech. Retrieved on June 4th, 2015.
  2. The fourth anti money laundering directive. Lexology. Retrieved on June 4th, 2015.
  3. Position Paper on the European Commission’s proposal for the Fourth Anti-Money Laundering Directive. AFME. Retrieved on June 4th, 2015.
  4. The fourth anti money laundering directive. Lexology. Retrieved on June 4th, 2015.
  5. The Fourth EU Anti-Money Laundering Directive. Deloitte. Retrieved on June 4th, 2015.
  6. The fourth anti money laundering directive. Lexology. Retrieved on June 4th, 2015.

MarketsReformWiki Sponsors

RSM US LLP ADM Investor Services Cinnober Fidessa