In reaction to the recent rise in terror attacks across Europe and the release of the Panama Papers in April ’16, several committees including the Economic and Monetary Affairs and Civil Liberties (EMACL) and European Economic and Social Committee (EESC) joined to review the 4th EU anti-money laundering directive, commonly referred to as 4AMLD. The latest revision, which came into effect on the 29th of June, has two main objectives:
- Obviate the financial organisation from being exploited
- Tighten the rules regarding transparency to inhibit the extensive concealment of monetary funds.
Although suggested changes to the 4AMLD are yet to be approved by all involved this is what we know so far:
- A Proposed Change in Access to Beneficial Ownership Registers
Under the current directive businesses are required to acquire and keep accurate, recent information on corporate and legal establishments. The revised changes will allow EU citizens access to these beneficial ownership records.
This change will hope to improve transparency about the ownership of companies and trusts.
- Tighter Restrictions on Virtual Currencies
With the introduction of clearer definition of virtual currencies, exchange platforms and digital wallet providers will need to apply customer due diligence controls, thus putting an end to anonymous transactions and trading.
- More Control on Prepaid Cards
As the use of prepaid cards continues to rise the need to address the risks associated with anonymous transactions has risen also. In an effort to identify customers using such methods of payment and balance transferal, it has been proposed that the threshold for identifying holders of prepaid cards be lowered to €50 whilst the maximum monthly payment transaction lowered to €150 from €250. With this user verification requirements have also extended.
- Broader Information Sharing
Under the former version of 4AMLD it can be difficult for financial intelligence units to acquire efficient access to information.
Delays in access to necessary information on holders of bank and payment accounts can result in actions related to money laundering and terrorist funding being missed until too late.
Within the updated version of 4AMLD it has been suggested that Member States will need to create an automated, centralised mechanism in the form of, for example; a central register. This will allow financial intelligence units access to details needed in an efficient, easy to search and unhampered way.
Along with this, the new directive proposes an increase of power for FIUs by allowing them to acquire any information they need without having to have made a previous report.
- Enhanced Due Diligence
Anti-money laundering regulations have been around for ten years but firms simply aren’t undertaking the risk assessments required by law.
A large number of firms only undertake basic due diligence; photocopying drivers licence/passport or completing a basic company search.
After completing an initial AML check, whether this be digitally or manually, firms should continue to review the risk assessment each year. Additional work may be required if the trustees or partners of an organisation have changed.
Enhanced due diligence on the Know Your Customer (KYC) process has also been revisited in the latest revision of 4AMLD. With a typical UK based client it can be obvious who the beneficial owners are, however it can be more difficult to establish for clients who desire money to go into overseas trusts. Because of this the latest revisions advise an improvement on checks carried out on high-risk third world countries – non-EU countries with inadequacies in their anti-money laundering prevention regimes. An AML search will instantly establish if the person in question is politically exposed or on a current sanctions list.
When undertaking an enhanced due diligence check it is important to consider the number of databases the process searches. If you choose to use an electronic ALM check this is all you’ll need to use.
- Heavier Penalties for Non-Compliance
In an attempt to accentuate the importance of complying with AML laws, one of the largest revisions to the directive is how the changes will be policed and what penalties will follow non-compliance. Previously under 4AMLD companies were required to incorporate an in-house money laundering reporting officer (MLRO). This has been revised and proposed that companies can, if they choose, designate a senior person within the company to carry the responsibility of ensuring the business is compliant with the rules stated within 4AMLD. The penalties for non-compliance have also been heightened to emphasise the gravitas of the need for compliance. Firms who find themselves in breach of the rules can face fines as high as £1m and prison sentences of up to seven years.
Ensure You’re Covered
If your business is covered by the Money Laundering Regulations then give Pali a call. Our friendly staff will be more than happy to help you get started with AML checks. The results, from AML Search – one of the leading money laundering experts, are instant and accurate and as we have incorporated a direct link to their system you can now order your Anti-Money Laundering Searches online through the regular Pali system at the same time as any other searches you require.