New AML & Tax lists proposed
On July 5, the European Commission (EC) outlined a proposal for key revisions to the Fourth Anti-Money Laundering Directive (4AMLD). These aim to further reinforce the European Union’s rules on anti-money laundering (AML), counter-terrorist financing (CFT) and tax evasion, including proposals that would strengthen corporate transparency requirements on beneficial ownership.
The Commission is proposing to introduce two new black lists:
The first list is the ‘The Money Laundering Deficiencies List’ which will prescribe EDD measures against those countries deemed not to have robust AML programmes. This will require Enhanced Due Diligence for higher risk countries. This will operate in a similar way to FATF non-compliant countries.
The second list is ‘The Tax Governance Deficiencies List’ which aims to fight tax evasion and avoidance. This non-cooperative tax list is due to be published in 2017 and will function like an informal sanction list. This will include countries who have good governance but poor tax regimes – essentially ‘naming and shaming’ non-cooperative countries for their lax tax policies.
The Lists are not to be merged, and should be assessed separately. The Chapter meeting discussed the issues of how the lists will be generated and with screening systems, ongoing changes and how FIs will be expected to calibrate accordingly. To find out more about these lists and the latest EU updates to bolster the fight against financial crime read ACAMS’s latest blog post here.
Virtual Currency & Prepaid instruments
With Prepaid Cards identified as a potential money laundering and terrorist financing risk, it has been proposed to lower the threshold at which certain Customer Due Diligence measures apply in the Exemption Criteria – to €150 for in-person purchases and €50 for online purchases. There will also be more stringent requirements for Cards used online so that CDD measures will need to be completed at the time the Card is activated. It’s hoped that as well as preventing financial crime, these strengthened regulations could also help bring prepaid cards into mainstream financial services.
The EC also announced the expected changes to AMLD4 around Virtual Currency providers who will now be required to apply AML/CFT measures required under local AML regulations. This includes undertaking customer due diligence (“CDD”), transaction monitoring and filing of suspicious activity reports (SARs).
Impact for CDD on UBOs
The impact of the proposed changes to regulations around Ultimate Beneficial Ownership (UBO) were also discussed at UK Chapter meeting. The proposed enhancements to the powers of Financial Intelligence Units (FIUs) means FIUs can now approach a financial institution even if no Suspicious Activity Report (SAR) has been raised.
The EC also propose to introduce an Electronic Data Retrieval System for businesses – a public central register in each EU country which would list information on the ultimate beneficial owners of a wide range of legal entities, including companies, foundations, holdings and trusts. It is intended that the different registers of EU members would be interconnected and made available both to law enforcement and “publicly … following prior identification of the person wishing to access the information through basic online registration.” There are doubts from the financial industry as to whether the existing banking infrastructure will support this kind of system, as well as concerns around data protection, privacy and cybersecurity risk.
Other points raised include that UBOs now have be to registered in the country in which it is administered and the threshold for which EDD must be carried out on Passive Non-Financial Institutions (e.g. holding companies and shell companies) has been lowered to 10%.
The EU aims to make improvements to the timeframe it takes to update a sanction list from when the UN announces it. Currently at 5 days, the EU will make this available immediately so that FIs can screen effectively.