On 19 June 2018, there was published in the Official Journal of the EU (OJ) the Fifth Anti-Money Laundering Directive (Directive 2018/843).
The Directive is part of the Commission’s Action Plan of February 2016 to strengthen the EU‘s fight against terrorist financing. It sets out a series of measures to better counter the financing of terrorism and to ensure increased transparency of financial transactions.
The key changes
The main changes that the Directive makes to the Fourth Anti-Money Laundering Directive (4MLD) are:
- improving transparency – beneficial ownership registers for legal entities, such as companies, will be public. This wider access to beneficial ownership information will enhance public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes. In addition, access to data on the beneficial owner of trusts will be accessible without any restrictions to Member State competent authorities, Financial Intelligence Units, professional sectors subject to anti-money laundering rules and to other persons who can demonstrate a legitimate interest. Also, when a trust is a beneficial owner of a company, access to this information can be requested in writing;
- better connectivity of beneficial ownership registers –Member State registers on beneficial ownership information will be interconnected directly to facilitate cooperation and exchange of information between Member States;
- lifting the anonymity on electronic money products – Member States have the possibility to allow the anonymous use of electronic money products in two situations: (i) when customers use their prepaid instrument (such as prepaid cards) directly in the shop for a maximum transaction amount of EUR 150; and (ii) when customers carry out an online transaction with a prepaid card below EUR 50;
- extending the scope of the anti-money laundering regime – anti-money laundering rules will apply to entities which provide services that are in charge of holding, storing and transferring virtual currencies, to persons who provide similar kinds of services to those provided by auditors, external accountants and tax advisors which are already subject to the 4MLD and to persons trading in works of art;
- improving checks on transactions involving high risk third countries – Member States will have to ensure that the sectors dealing with countries presenting strategic deficiencies in their anti-money laundering and counter terrorism financing regimes listed by the Commission apply systematic enhanced controls on their financial transactions from and to these countries. The list of checks is now harmonised. Also, the Commission will include on its list third countries with low transparency on beneficial ownership information, no appropriate and dissuasive sanctions or which do not cooperate nor exchange information;
- centralised bank account registers or retrieval systems – Member States are required to set up centralised bank account registers or retrieval systems to identify holders of bank and payment accounts. The Commission will work on the technical aspects to ensure the interconnection of such registers or retrieval systems;
- enhancing the powers of EU Financial Intelligence Units – EU Financial Intelligence Units will have access to more information through centralised bank and payment account registers or data retrieval systems; and
- enhanced cooperation between EU financial supervisory authorities – the Directive enhances the exchange of information and cooperation between EU financial supervisory authorities in full respect of confidentiality rules, including with the European Central Bank.
Spotlight on virtual currencies
Significantly, the Directive extends the 4MLD by including virtual currency exchange platforms (VCEPS) and custodian wallet providers (CWPs) as “obliged entities” subject to EU anti-money laundering requirements.
The Directive streamlines Member States’ regulatory regimes for virtual currency by defining certain key terms which Member States will implement into their own anti-money laundering legislation. In particular, the Directive defines “virtual currency” as a “digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.” It also defines CWPs as an “entity that provides services to safeguard private cryptographic keys on behalf of their customers, to hold, store and transfer virtual currencies.”
Member States are required to bring into force the laws, regulations and administrative provisions necessary to comply with the Directive by 10 January 2020.