Preventing abuse of the financial system for money laundering and terrorism purposes

SUMMARY OF:

Directive (EU) 2015/849 — prevention of the use of the financial system for the purposes of money laundering or terrorist financing

WHAT IS THE AIM OF THE DIRECTIVE?

Directive (EU) 2015/849 (4th Anti-Money Laundering Directive, 4AMLD) aims to combat money laundering* and the financing of terrorism* by preventing the financial market from being misused for these purposes.
It seeks to extend and replaces the previous Directive (EC) 2005/60 (3rd Anti-Money Laundering Directive, 3AMLD) that entered into force in 2007.
Its purpose is to remove any ambiguities in the previous directive and associated legislation, and to improve the consistency of anti-money laundering (AML) and counter-terrorist financing (CTF) rules across all European Union (EU) Member States. The 4AMLD also takes into account the recommendations of the Financial Action Task Force from 2012.

KEY POINTS

The directive applies to:

credit institutions;
financial institutions;
designated non-financial businesses and professions, such as:
- auditors,
- external accountants,
- tax advisors,
- notaries and lawyers, in certain circumstances,
- estate agents,
- traders in goods (e.g. precious metals and stones, when payments of €10,000 or more are made in cash),
- providers of gambling services.

The directive specifies the following actions.

Reinforces the rules regarding the identification of customers — especially beneficial owners* of companies and legal arrangements (trusts).
Requires information on beneficial ownership for companies to be held in each Member State in a central register, such as a commercial register, a company register or a public register.
Improves the awareness of and responsiveness to any money laundering / terrorist financing (ML/TF) weakness: in addition to the national risk assessments to be carried out by Member States, the European Commission also conducts assessments of the ML/TF risks affecting the internal market and related to cross-border activities (the first report was released on 26 June 2017).
Brings about a coordinated European policy to deal with non-EU countries (third countries) which have inefficient AML/CTF regimes, to protect the EU’s financial system. The first EU list of ‘high-risk third countries’ was adopted by a Commission delegated act in July 2016 and the list has since been amended several times.
Strengthens and improves cooperation between Financial Intelligence Units (FIUs), which are among the key actors in the fight against ML/TF. A systematic exchange of information between FIUs should take place through advanced technical infrastructures using FIU.net, a decentralised computer network using a sophisticated matching technology.

Those subject to the directive must:

report suspicions of money laundering or terrorist financing to the public authorities, usually the financial intelligence unit;
take supporting measures, such as ensuring the proper training of personnel and establishing appropriate internal preventive policies and procedures;
take additional safeguards such as enhanced customer due diligence for situations of higher risk, such as trading with banks situated outside the EU and, in particular, when dealing with natural or legal entities established in non-EU countries identified by the Commission as high-risk third countries.

Amendment to Directive (EU) 2015/849

After a series of terrorist attacks in Europe in 2016, Directive (EU) 2018/843 (5th Anti-Money Laundering Directive, 5AMLD) amending Directive (EU) 2015/849 was adopted in 2018. The amending directive had to become law in the Member States by 10 January 2020. The new directive tightens the EU’s rules on preventing money laundering and terrorist financing in a number of ways, including:

extending the scope of the directive to cover:
- in addition to auditors — external accountants, tax advisors and any other person who offers tax consultancy services,
- estate agents, when acting as intermediaries in the letting of immovable property for which the monthly rent exceeds €10,000,
- art dealers, where the value of a transaction is €10,000 or more;
access to information on beneficial ownership, thus improving transparency in the ownership of companies and trusts;
prohibiting banks from keeping anonymous safe-deposit boxes (in addition to anonymous accounts and passbooks that were already covered by Directive (EU) 2015/849);
addressing risks linked to prepaid cards and virtual currencies by:
- lowering the identification threshold for prepaid cardholders from the current €250 to €150,
- enabling national FIUs to obtain information allowing them to trace the identity of the owner of the virtual currency;
strengthened cooperation between FIUs, allowing them to share more information.

Supplement to Directive (EU) 2015/849

Delegated Regulation (EU) 2019/758 lays down a set of additional measures, including minimum action, that credit and financial institutions must take to effectively handle the money laundering and terrorist financing risk where a non-EU country’s law does not permit the implementation of group-wide policies and procedures at the level of branches or majority-owned subsidiaries that are part of the group and established in the non-EU country.

Amendment to Directive (EU) 2015/849

Directive (EU) 2019/2177 amends Directive (EU) 2015/849 to take into account amendments made to Regulation (EU) No 1093/2010 setting up the European Banking Authority (see summary) — giving it a new mandate in preventing the use of the financial system for the purposes of money laundering and terrorist financing and in leading, coordinating and monitoring the efforts of all EU financial services providers and competent authorities in this domain, effective as of 1 January 2020.

FROM WHEN DOES THE DIRECTIVE APPLY?

Directive (EU) 2015/849 has applied since 25 June 2015 and was originally supposed to become law in the Member States by 26 June 2017. This deadline was, however, further extended by several amendments, in particular Directive (EU) 2018/843, which had to be fully incorporated into Member States’ national law by 10 January 2020.

BACKGROUND

The directive is part of a package of EU legislative measures aimed at preventing money laundering and terrorist financing that includes Regulation (EU) 2015/847 on the traceability of money transfers (see summary). It is also part of a broader EU strategy to tackle financial crime that includes the work of:

an Expert Group on Money Laundering and Terrorist Financing that meets regularly to exchange views and assist the Commission to prepare legislation or define policy;
a Committee on the Prevention of Money Laundering and Terrorist Financing that may provide opinions on implementing measures proposed by the Commission;
the network of Financial Intelligence Units;
the Joint Committee of European Supervisory Authorities.

For more information, see:

Anti-money laundering and countering the financing of terrorism (European Commission)
Fight against the financing of terrorism (European Commission)
Anti-Money Laundering and Countering the Financing of Terrorism (European Banking Authority).

KEY TERMS

Money laundering. The conversion of the proceeds of crime into apparently clean funds, usually via the financial system, for example by disguising the sources of the money, changing its form or moving the funds to a place where they are less likely to attract attention.

Terrorist financing. The supply or collection of funds intended to be used to carry out terrorist offences.

Beneficial owner. The person who ultimately owns or controls a company.

MAIN DOCUMENT

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 (OJ L 141, 5.6.2015, pp. 73–117).

Successive amendments to Directive (EU) 2015/849 have been incorporated in the original text. This consolidated version is of documentary value only.