Council and Parliament reach agreement on 5th Anti-Money Laundering Directive

On 5 July 2016 the European Commission proposed a fifth revision of the Anti-Money Laundering Directive as part of its Action Plan for strengthening the fight against terrorist financing, announced in February 2016. The proposal included, in particular, several measures to enhance the powers of the EU Financial Intelligence Units, to introduce stricter safeguards for financial flows from high-risk countries, and to tackle risks linked to virtual currencies and anonymous pre-paid instruments.

As a reaction to the Panama Papers revelations in April 2016, the Commission’s proposals also contained rules to increase transparency within the EU, by granting public access to beneficial ownership registers on companies and business-related trusts, interconnecting national registers to facilitate cooperation between EU Member States, and extending the information available to national authorities.

The updated Directive aims to prevent the use of the financial system for the funding of criminal activities and to strengthen transparency rules to prevent the large-scale concealment of funds.

With the objective of enhancing access to information on beneficial ownership, the following measures will be introduced:

• Registers of beneficial owners of companies operating within the EU will be made publicly accessible and national registers will be subsequently better interconnected, to facilitate cooperation between Member States.
• Registers of beneficial ownerships of trusts and similar legal arrangements will only be publicly accessible where there is a legitimate interest; where trusts were set up for non-commercial purposes (e.g. for charity or the use of family assets) accessibility will be limited to essential data; and access to beneficial ownership information on trusts will be granted upon written request in cases where the trust owns a company that is not incorporated in the EU.
• Information on national bank accounts and safe deposit boxes will be registered as well as information on real estate ownership, although the latter will only be accessible to public authorities.
• EU Member States will retain the right to provide broader access to information, in accordance with their national law.

The possibility to collect beneficial ownership information on life insurance contracts and financial instruments will not be covered by the new provisions of the Directive.

In order to address the risks derived from prepaid cards and virtual currencies, the scope of the Directive will be widened to cover electronic wallet providers and virtual currency exchange service providers. Furthermore, the threshold for identifying the holders of prepaid cards will be lowered from EUR 250 to EUR 150.

The revised Directive provides for extended responsibility and reporting obligations and for facilitated cooperation between national Financial Intelligence Units (FIUs) and bank supervisors regarding the exchange of information. As a consequence, national FIUs will have access to information in centralized bank and payment account registers, enabling them to identify account holders. 

With respect to transactions with third countries identified by the European Commission as presenting an increased risk of money laundering, the amended Directive provides tougher criteria regarding the obligation to report suspicious transactions and provides for possible sanctions against violations. 

The amended Directive is expected to enter into force by the end of 2019, i.e. 18 months after its publication, expected in mid-2018. In respect of the specific provisions of the Directive, it is foreseen that national registers of beneficial owners of companies will be made public by the end of 2019, while national beneficial ownership registers of trusts will be accessible to persons with a legitimate interest in early 2020. In addition, the implementation of national bank account registers is expected as from 2020, whereas the interconnection of all national registers will proceed from 2021.