On 17 January 2024, the European Parliament and Council of the EU (Council) reached a provisional agreement on parts of the anti-money laundering (AML) package that aims to protect EU citizens and the EU’s financial system against money laundering (ML) and terrorist financing (TF). Under the new package, all rules applying to the private sector will be transferred to a new regulation, while a directive will deal with the organisation of institutional AML and counter TF systems at the national level in member states.
Obliged entities and enhanced due diligence
The provisional agreement expands the list of obliged entities to include new bodies. The new rules will engage most of the crypto sector through requiring all crypto-asset service providers (CASPs) to conduct due diligence on their customers. CASPs will need to apply customer due diligence measures when carrying out transactions amounting to EUR 1,000 or more. Other sectors concerned by customer due diligence and reporting obligations will be traders of luxury goods, as well as professional football clubs and agents. The Council and European Parliament also introduce specific enhanced due diligence measures for cross border relationships for CASPs. These include requiring credit and financial institutions to undertake enhanced due diligence measures in business relationships with high-net-worth individuals.
An EU wide maximum limit of EUR 10,000 is also set for cash payments, which will make money laundering more difficult.
The provisional agreement makes the rules on beneficial ownership more harmonised and transparent. The agreement clarifies that beneficial ownership is based on two components – ownership and control. Both aspects need to be analysed to identify all the beneficial owners of that legal entity or across types of entity. Accordingly, the agreement sets the beneficial ownership threshold at 25%.
Related rules applicable to multi-layered ownership and control structures are also clarified to ensure hiding behind multiple layers of ownership of companies will become ineffective.
High risk third countries
Obliged entities will also be required to apply enhanced due diligence measures to transactions and business relationships involving high risk third countries, whose shortcomings in their national AML and counter terrorism regimes make them a threat to the integrity of the EU’s internal market.
Anti-money laundering directive
According to the provisional agreement, persons or entities subject to targeted financial sanctions will need to be flagged. The agreement also establishes that in addition to supervisory and public authorities (as well as obliged entities), persons of the public with legitimate interest may access the registers.
The responsibilities of FIUs
The provisional agreement also expands the power of financial intelligence units (FIUs) in analysing and detecting ML and TF cases. To increase transparency, FIUs will have immediate and direct access to financial, administrative and law enforcement information. The agreement emphasises that applying fundamental rights is an integral part of FIUs’ work and as such, it outlines a framework for suspending or withholding consent to a transaction.
To harmonise the powers and measures taken by supervisors, they will report to the FIUs’ instances of suspicions, as new supervisory measures for the non-financial sector, so-called supervisory colleges, are introduced.
Both EU and national risk assessments remain an important tool. The Commission will conduct an assessment of ML and TF risks at the EU level and provide recommendations to Member States.
The texts will now be finalised and presented to Member States’ representatives in the Committee of Permanent Representatives and the European Parliament for approval. If approved, the Council and European Parliament will have to formally adopt the texts before they are published in the Official Journal of the EU and enter into force.