This year will see another push to increase co-operation between public institutions and the financial sector to crack down on illicit money flows such as money-laundering, terrorist-financing and corruption.
A major provision of the Fourth Money Laundering Directive (4ML) is the compulsory introduction of Registers of Beneficial Ownership in all EU countries. The registers will apply to both companies and trusts, although with different rules for each. It increases transparency around beneficial ownership of companies and trusts. The threshold for beneficial ownership remains unchanged; being those controlling more than 25% of a business, but companies (and possibly trusts) will be required to maintain records evidencing beneficial ownership.
Once the Directive is adopted, member states have a maximum of two years to transpose the Directive into national legislation. It is anticipated that adoption will take place at some point in 2015 with the new UK regulations likely to come into force in late 2015 or early 2016. This will ensure that the new provisions are in place before the Financial Action Task Force (FATF) mutual evaluation review of the UK in spring 2016. What are you views on this subject?
The impact of most of the changes on UK regulated firms is unlikely to be substantial, as the UK’s anti money laundering (AML) regime incorporates the majority of these rules already and was considered amongst the ‘gold standard’ for AML regulation. However, the biggest impact will be felt in relation to increasing the transparency of beneficial owners. It is likely that companies will need to transmit up-to-date information to a central public register accessible by regulators and regulated businesses. Enhanced due diligence to be carried out on domestic PEPs (Politically Exposed Persons) is another change, as is the requirement in the Directive for a written risk assessment. Would this directly affect your firm? And do you currently have measures in place to ensure a smooth transition?
Large cash transactions are especially vulnerable to money-laundering and require higher levels of caution. Traders are required to conduct customer due diligence checks for cash transactions over a certain threshold, with the 4ML this limit will be reduced from the current level of €15,000 to €10,000. The Commission’s initial proposal saw this limit halved, but has not made it into the current text of the Directive.
The Fourth Anti-Money Laundering Directive is a considerable regulatory advancement, yet its success will depend upon the consistent interpretation and implementation across EU Member States. Public lists of shareholder information including beneficial owners are without a doubt great tools to detect suspicious financial activity. Yet it remains to be seen how open this data will be: ultimately, ‘legitimate interest’ but also ‘legitimate claims’ for data privacy and security concerns will be defined by individual member states – and not Brussels. Would you agree that the Directive is needed and the proposals outlined will be effective?
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