On 10th January 2020, EU Member states will have to implement new AML rules into their national legislation. The European Commission presented its proposal for a 5th Anti-Money Laundering Directive on 5 July 2016 which aims at ensuring a significant tightening of the European regulations for the prevention of money laundering and terrorism financing. The 5th Anti-Money laundering directive has been adopted and entered into force on 9 July 2018.
As per the European Commission’s fact sheet on the 5th Anti-Money Laundering Directive, this directive aims at:
- Setting up centralised bank account registers or retrieval systems
- Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation
- Enhancing cooperation between financial supervisory authorities
- Lifting the anonymity on electronic money products (prepaid cards) in particular when used online
- Extending Anti-Money Laundering and Counter Terrorism financing rules to virtual currencies, tax related services, and traders in works of art.
- Improving transparency on the real owners of companies
- Improving transparency on the real owners of trusts
- Interconnection of the beneficial ownership registers at EU level
- Broadening the criteria for assessing high-risk third countries and improving checks on transactions involving such countries
It is worth highlighting that accessing data related to beneficial owners of trusts is not accessible to the public. This access is understood to be restricted to competent authorities including Financial Intelligence Units, the professional sectors subject to Anti-Money laundering rules (such as banks, lawyers) as well as other persons who can demonstrate a legitimate interest. Additionally, it is important to mention that the national registers on beneficial ownership information will be directly interconnected to facilitate cooperation and exchange of information between Member States.
The above objectives are meant to increase public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes.
Worth noting also that new criteria have been added to assess high-risk third countries, including transparency of beneficial ownership. 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 European Commission apply systematic enhanced controls on the financial transactions from and to these countries. The list of checks is now harmonised to ensure there are no loopholes in the EU. In addition, the listing of the Commission will include third-countries with low transparency on beneficial ownership information, no appropriate and dissuasive sanctions or which do not cooperate nor exchange information.
Cedar Rose’s investigative due diligence reports, including tracing the source of wealth of persons residing in high risk third countries as well as the UBOs of companies registered in these same countries, tends to directly serve these objectives. Our database, which includes more than 24 million persons’ data and over twelve million companies, provides a solid foundation for tracing UBO’s and for performing link analysis. Fresh investigations to trace the source of wealth of a person through a local reputational report or via understanding his directorship and shareholding structure is also available to facilitate your investigations.
Written By Wassim Antar, Senior Due Diligence Analyst
See our Due Diligence Case Study here.