29/03/23

GLOBAL REGULATION: EU pushes for new AML and CFT rules.

As published on thepaypers.com, Wednesday 29 March, 2023.

The European Parliament has announced that MEPs approved stricter rules for closing the gaps in combating money laundering, terrorist financing and evasion of sanctions in the EU.

As per the information detailed in the press release, MEPs from the Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees adopted their position on three pieces of draft legislation on the financing provisions of the EU policy for AML/CFT (anti-money laundering and countering the financing of terrorism).

The package consists of:

• The EU ‘single rulebook’ regulation, with provisions on conducting due diligence on customers, transparency of beneficial owners, and usage of anonymous tools like crypto assets, and new entities such as crowdfunding platforms, together with provisions on ‘golden’ passports and visas.
• The 6th anti-money laundering directive, with national provisions on supervision and Financial Intelligence Units, and on access for competent authorities to needed and reliable information.
• The regulation establishing the European Anti-Money Laundering Authority (AMLA) with supervisory and investigative powers to ensure compliance with AML/CFT requirements.

As per the adopted texts, entities like banks, assets and crypto assets managers, and real and virtual estate agents, amongst others, are set to be required to verify their customers’ identity, what they own, and who controls the company. Furthermore, they will be required to establish detailed types of risk of money laundering and terrorist financing within their activity sector and provide the relevant information to a central register.

MEPs wish to cap payments that can be accepted by people offering goods and services to restrict transactions in cash and crypto assets, having set up limits of up to EUR 7,000 for cash payments and EUR 1,000 for crypto asset transfers where the customer cannot be identified. Furthermore, due to the manifest risk of misuse by criminals, MEPs are looking to ban ‘citizenship by investment schemes’ (golden passports) and to impose strong AML controls on ‘residence by investment schemes’ (golden visas).

When talking about financial intelligence units (FIU), each member state should establish one to prevent, report, and combat money laundering and terrorist financing. FIUs will be expected to share information with each other and authorities and cooperate with AMLA, Europol, Eurojust and the European Public Prosecutor’s office.

To detect money laundering schemes and freeze assets in due time, FIUs together with competent authorities should be enabled access to information on beneficial ownership, bank accounts, land, or real estate registers. Additionally, MEPs want member states to aggregate information on ownership of goods worth over EUR 200,000 or goods stored in free zones.

Information on beneficial ownership held in national central registers should be made available digitally and include data for a defined period, with the entity in charge set to have the right to request any information needed to identify and verify their beneficial owners. The information will have to be up to date and available to FIUs, AMLA, competent authorities, self-regulatory bodies, and obliged entities, with any failure in providing accurate and adequate data to registers set to be sanctioned.

The new AMLA is going to monitor risks and threats and supervise specific credit and financial institutions, classifying them based on their risk level. To do this, AMLA could mandate companies and people to hand over documents and other information, conduct on-site visits with judicial authorisation, and impose sanctions of EUR 500,000 – EUR 2 million for material breaches.

On the draft law, MEPs want to provide AMLA with the power to mediate between national financial supervisors and settle disputes, supervise and investigate the national implementation of the single AML rulebook, ensure oversight of the supervisors in the non-financial sector and receive complaints, with the agency’s seat set to be decided during the Parliament – Council negotiations.