After the approval of the agreed text by the Parliament on April 19, 2018, the European Council adopted a Directive on 14 May, 2018, regulating the European rules aimed at preventing money laundering and terrorism funding. These rules are the fifth in a series and the latest update of the European Anti-Money Laundering Directive, for which they have received the name 5AMLD.
5AMLD is aimed at improving the security in Europe by stopping the financing of criminal activities without preventing the normal functioning of payment systems. It is partly a response to the terrorist attacks in Europe in 2016 and introduces such major changes into the directive 2015/849:
- verification of the client for virtual currencies;
- public access to information about the real owners of companies;
- strengthening of transaction checks with the participation of third countries with a high level of risk;
- cooperation between financial intelligence units;
- reduction of the threshold for identification of owners of prepaid cards from 250 to 150 Euro;
- extension of the Directive to all tax advisers, agents, dealers, as well as suppliers of electronic wallets and cryptocurrency service providers.
Special attention should be paid to the measures to eliminate the risks associated with cryptocurrencies. In order to cease the anonymity associated with virtual currencies, along with banks and financial institutions, AMLD requirements also apply to providers of exchange transactions between virtual and fiat currencies, as well as providers of virtual wallets – the organizations that provide services to protect cryptographic keys on behalf of their own clients for storage and transfer of virtual currency. Now they must be registered, carry out due diligence of clients, including the requirement to verify clients, and also put pressure on trusts and trading companies to identify the owners of cryptocurrency.
It is noteworthy that 5AMLD defines the virtual currency for the first time: “Digital representation of value that is not issued or guaranteed by the central bank or state body and it is not necessarily related to a legally established currency and does not have the legal status of currency or money, but it is accepted by individuals or legal entities as the means of exchange and can be transferred, stored and sold electronically”.
The provision of the right to the citizens to access information about the beneficial owners of companies operating in the EU may help to eradicate the use of shell companies created for money laundering, concealment of wealth and avoidance of paying taxes.
The data on beneficial owners of companies and trusts will be revealed to all who can demonstrate “legitimate interest”. This will provide information to investigative bodies, public organizations and journalists.
The financial intelligence units will be given new powers to request information on the terrorism funding / money laundering from companies. They will be given direct access to information about the beneficial owners of the companies, as well as centralized national banking and payment registers or central data retrieval systems which must be established in each EU Member State. Cooperation and information exchange between the financial intelligence units will be also improved.
The new Directive also establishes more stringent criteria for assessing the increased risk of money laundering for non-EU countries. Now the transactions involving the citizens from risky countries (including possible sanctions) are subject to closer scrutiny.
Each of the EU Member States should implement the provisions of 5AMLD in the national legislation within 18 months, that is, by the end of 2019, we will see the new rules in action.