(July 16, 2018) On July 9, 2018, the amendment of the European Union (EU) Anti-Money Laundering Directive (5th AMLD) entered into force. The AMLD obligates certain entities to fulfill customer due diligence requirements when they conduct business transactions and have in place policies and procedures to detect, prevent, and report money laundering and terrorist financing. The amendment
- brings custodian wallet providers and virtual-currency exchange platforms within the scope of the AMLD,
- interconnects the national central beneficial ownership registers,
- enhances access to these registers,
- lowers thresholds for the use of anonymous prepaid cards,
- establishes centralized mechanisms to identify holders of payment or bank accounts, and
- sets stricter standards for financial transactions with high-risk third countries.
Member States must implement the new rules into national law by January 10, 2020. (Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 Amending Directive (EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, and Amending Directives 2009/138/EC and 2013/36/EU (5th AMLD), 2018 O.J. (L 156) 43, EUR-Lex website; Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, Amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and Repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (4th AMLD), 2015 O.J. (L 141) 73, EUR-Lex website).
Definition of Virtual Currencies and Custodian Wallet Providers
The amendment defines “virtual currencies” 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.” A “custodian wallet provider” is defined as “an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.” (5th AMLD art. 1, para. 2(d).) As previously mentioned, the new rules extend the customer due diligence requirements to custodian wallet providers and virtual-currency exchange platforms.
Central Beneficial Ownership Registers
Another change to improve transparency concerns the national central beneficial ownership registers in the EU Member States. Beneficial owners are defined as “any natural person(s) who ultimately owns or controls the customer, and/or natural person(s) on whose behalf a transaction or activity is conducted.” (4th AMLD art. 3, para. 6.) The amendment requires that the central beneficial ownership registers for corporate or other legal entities are available to any member of the general public. (5th AMLD art. 1, para. 15(c).) The previous version of the AMLD made access for members of the general public dependent on demonstrating a legitimate interest. (4th AMLD art. 30, para. 5.) Information on beneficial owners of trusts will for the first time be available to the general public, but only to those who show a legitimate interest. (5th AMLD art. 1, para.16(d).) Previously, only competent authorities, Financial Intelligence Units, and entities subject to the customer due diligence rules were granted access to beneficial ownership information on trusts. (4th AMLD art. 31, para. 4.) When a trust is the beneficial owner of an entity, information will be accessible to persons that file a written request. (5th AMLD art. 1, para.16(d).)
Furthermore, in order to facilitate cooperation and information exchange between the Member States, the amendment requires Member States to connect their central registers via the “European Central Platform.” (5th AMLD art. 1, para.15 (g).) The interconnection of the central registers via the European Central Platform must be completed by March 10, 2021. (Id. art. 1, para. 42.) Beneficial ownership information must be available through the national registers and the interconnected European Central Platform for at least five years and no more than ten years after the entity has been removed from the register. (Id. art. 1, para.15 (g).)
Use of Anonymous Prepaid Cards
Furthermore, the amendment of the AMLD lowers the monetary thresholds for identifying the holders of prepaid cards to address risks linked to their use in financing terrorist activities. Payments carried out with anonymous prepaid cards online will be allowed only when the transaction amount does not exceed €50 (about US$59). (5th AMLD recital 14; art. 1, para. 17(b).) In-store use of an anonymous prepaid card must not exceed an amount of €150 (about US$176). (Id. art. 1, para. 7(a).)
Centralized Automated Mechanisms for Payment and Bank Accounts
The amendment obligates EU Member States to establish centralized registries or electronic data retrieval systems to identify natural or legal persons holding or controlling payment accounts, bank accounts, and safe-deposit boxes. (Id. art. 1, para. 19.) The national Financial Intelligence Units (FIUs) must be allowed direct, immediate, and unfiltered access to that information. Technical aspects of the interconnection of the centralized registries is to be worked out by the European Commission by June 26, 2020. (Id.)
High-Risk Third Countries
Finally, the amendment sets stricter standards for financial transactions with high-risk third countries, meaning non-EU countries that have been identified by the European Commission as having strategic deficiencies in their anti-money laundering or counterterrorism regimes. If a country is on that list, enhanced due diligence requirements must be performed by the companies conducting business with such a country. The AMLD harmonizes the enhanced due diligence obligations across the EU, but Member States may require companies to perform one or more additional mitigating measures. (Id. recital 12; art. 1, para. 11.)