Proposal to reinforce the EU’s rules on anti-money laundering

On the 5th February 2013 the Commission has adopted a proposal to reinforce the EU’s existing rules on anti-money laundering by adopting a new directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.

In particular, the proposed new Directive:

improves clarity and consistency of the rules across the Member States

• by providing a clear mechanism for identification of beneficial owners. In addition, companies will be required to maintain records as to the identity of those who stand behind the company in reality.
• by improving clarity and transparency of the rules on customer due diligence in order to have in place adequate controls and procedures, which ensure a better knowledge of customers and a better understanding of the nature of their business. In particular, it is important to make sure that simplified procedures are not wrongly perceived as full exemptions from customer due diligence.

• and by expanding the provisions dealing with politically exposed persons, (i.e. people who may represent higher risk by virtue of the political positions they hold) to now also include “domestic” (those residing in EU Member States) (in addition to ‘foreign’) politically exposed persons and those in international organisations. This includes among others head of states, members of government, members of parliaments, judges of supreme courts.

extends its scope to address new threats and vulnerabilities

• by ensuring for instance a coverage of the gambling sector (the former directive covered only casinos) and by including an explicit reference to tax crimes.

promotes high standards for anti-money laundering

• by going beyond the FATF requirements in bringing within its scope all persons dealing in goods or providing services for cash payment of €7,500 or more, as there have been indications from certain stakeholders that the current €15,000 threshold was not sufficient. Such persons will now be covered by the provisions of the Directive including the need to carry out customer due diligence, maintain records, have internal controls and file suspicious transaction reports. That said, the directive provides for minimum harmonisation and Member States may decide to go below this threshold.

• strengthens the cooperation between the different national Financial Intelligence Units (FIUs) whose tasks are to receive, analyse and disseminate to competent authorities reports about suspicions of money laundering or terrorist financing.

The proposal foresees a reinforcement of the sanctioning powers of the competent authorities by introducing for instance a set of minimum principle-based rules to strengthen administrative sanctions and a requirement for them to coordinate actions when dealing with cross-border cases.