EU Fifth Anti-Money Laundering Directive now set for statute books
Members of Parliament voted last week on the Fifth Anti-Money Laundering Directive, the vote was passed by 574 to 13 with 60 abstentions following a December agreement reached by the Council. This means that in future, the true owners of letterbox companies and data about the beneficial owners of firms operating in the EU will be accessible to any citizen. Closer regulation for virtual currencies, such as Bitcoin was also proposed to prevent these virtual currencies to be used for money laundering and terrorism financing. These new steps are partly due to the Panama Papers leaks and terrorist attacks in 2015 in Paris and 2016 in Brussels.
The Panama Paper leaks was a catalyst that showed the corrupt use of letterbox companies created to launder money, hide wealth and avoid paying taxes. The vote of MEP’s to give citizens access to the beneficial owners of firms operating in the EU paves the way to stop these corrupt financial practices. The corresponding information will also have to be collected for trusts, but access to it will be limited to those with a ‘legitimate interest’, the definition of which is ‘governed by the law of the Member State where the beneficial ownership information of the trust or similar legal arrangement is registered’.
The new measures also address risks linked to prepaid cards and virtual currencies. In a bid to end the anonymity associated with virtual currencies, virtual currency exchange platforms and custodian wallet providers will, like banks, have to apply customer due diligence controls, including customer verification requirements. These platforms and providers will also have to be registered, as will currency exchanges and cheque cashing offices, and trust or company services providers.
Other measures agreed upon as part of the update include a reduction in the threshold for identifying the holders of prepaid cards from currently €250 to €150; tougher criteria for assessing whether non-EU countries pose an increased risk of money laundering and closer scrutiny of transactions involving nationals from risky countries (including the possibility of sanctions); protection for whistleblowers who report money laundering (including the right to anonymity); an extension of the Directive to cover all forms of tax advisory services, letting agents, art dealers, as well as electronic wallet providers and virtual currency exchange service providers.
The updated directive will enter into force three days after its publication in the Official Journal of the European Union. Member states will then have 18 months to transpose the new rules into national law.