About a month ago, we have witnessed a formation of an Anti-Money Laundering Authority (AMLA), which will be seated in Frankfurt, Germany. The AMLA is expected to begin its operations mid-2025 and have over 400 staff members, with direct and indirect supervisory powers over obliged entities and the power to impose sanctions and appropriate measures/penalties, and is a centerpiece of a wider EU anti-money laundering agenda in terms of a reform of the existing framework.
As part of that reform, the Members of the European Parliament (MEP) struck a deal with the European Council on new measures to strengthen the EU’s existing toolkit to fight money laundering, terrorist financing and sanctions evasion. That deal is actually a provisional agreement on the sixth Anti-Money Laundering Directive (AML Directive).
SCOPE AND PURPOSE
The said Directive, as it currently is involving the mentioned provisional agreement, will impose stricter obligations on subject entities like banks, casinos, real estate agencies, even crypto asset service providers and football clubs, among others (albeit the measures towards football clubs shall apply starting from 2029). Even the ultra-rich (high net-worth) individuals come under scrutiny.
Purpose – to combat the money laundering and terrorist financing efforts that are constantly evolving and escaping the regulatory framework. It is a part of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) package comprising of five previously adopted AML Directives. The to-be-mentioned below set of rules is aimed at exhaustive harmonization of rules throughout the EU.
KEY ELEMENTS
The focal points of the latest AML Directive are:
- Uniform/Harmonized EU supervision and consistent application of rules and sanctions;
- EU widespread access to information on beneficial owners;
- More powers, i.e. greater authority for Financial Intelligence Units (FIUs);
- Limit on cash payments of EUR 10,000.00 EU-wide;
- Transparency rules shall apply to professional football clubs as well, starting from 2029.
The first point is pretty much self-explanatory, and is explained in more detail through these subsequent points. Therefore, the recently introduced legislation grants access to data on actual ownership and enhances the authority of Financial Intelligence Units (FIUs) to scrutinize and identify instances of money laundering and terrorist financing, in addition to granting them the ability to halt transactions that raise suspicion (points 2 and 3).
For reference, beneficial ownership denotes the individual(s) who actually exercise the control or enjoy the benefits through owning a legal entity, such as corporation, trust etc., even though the title or property is on another name. This includes non-EU entities as well, provided that they do business in the EU or purchase real estate in the EU. The beneficial ownership threshold is set at 25%. Therefore, no hiding behind complex legal structures should be possible, even though many of Ultimate Beneficial Ownership (UBO) measures were already practiced by banks, but is now extended to other entities as well.
In terms of concrete information available to FIUs, they are granted immediate and direct access to financial, administrative and law enforcement information, including tax information, information on funds and other assets frozen pursuant to targeted financial sanctions, information on transfers of funds and crypto-transfers etc. In order to make the necessary analysis, assess the raised suspicions and share the results with competent national authorities, they are allowed to (as mentioned above) halt, i.e. suspend transactions or withhold the consent for a transaction.
As for the EU-wide cash payments limit, it should be set to EUR 10,000.00 max so no discrepancies in that regard should exist between the Member States (point 4). However, the said point left the option for Member States to impose a lower maximum limit if they wish so, basically undermining the harmonization aspect of this point. Additionally, obliged entities would be required to identify and verify the data of a person carrying out an occasional cash transaction between EUR 3,000.00 and EUR 10,000.00.
Finally, we mentioned the football clubs coming under the scrutiny of FIUs, albeit from 2029. In terms of specific obligations, they shall be required to verify identity of their customers, oversee monetary transactions and report any transaction to FIUs that appears dubious (point 5). The reasons why football clubs came into the spotlight is because in recent years they have proven to be ideal vessels for money laundering, operating with extremely high sums of money, as well as promoting ideals of a country which invests its assets through various state-linked funds, trusts etc., even though such ideals are not necessarily true.
WHAT NEXT?
The outlined provisions are in more of a draft-like phase and they need to be finalized and presented to representatives of Member States sitting in the Committee of Permanent Representatives and the European Parliament for approval. If and once approved, the provisions will be formally adopted and be eligible to enter into EU’s legal system.
Nonetheless, the EU’s determination to combat this high-end crime and organizations operating through various schemes looks more firm than ever.
Author:
Aleksandar Čermelj
Senior Associate
*The information in this document does not represent legal advice and is provided for general informational purposes only.
**Partner, Senior Associate, Associate and/or Junior Associate refers to Independent Attorney at Law in cooperation with IVVK Lawyers in Cooperation with LexQuire.
11/04/2024
