Preventing abuse of the financial system for money laundering and terrorism purposes (from 2027)

KEY POINTS

The following are among the businesses and activities considered obliged entities:

• credit and financial institutions;
• auditors, external accountants, tax advisors and lawyers whose main profession is providing tax advice;
• notaries, lawyers and legal professionals involved in financial or real estate transactions or in the planning of certain transactions for their clients;
• other entities including professional football clubs and football agents and traders in certain high-value goods.

The regulation contains the possibility of full or partial exemptions if national assessments consider the following to be low risk:

• certain gambling activities;
• professional football clubs participating in the highest division with an annual turnover of less than €5 million for the previous two calendar years and those taking part in the lower divisions on the basis of proven low risk; and
• various small-scale financial activities, provided strict turnover and threshold ceilings are respected.

Obliged entities must:

• notify their own national supervisors before operating in another European Union (EU) Member State for the first time;
• apply internal policies, procedures and controls to mitigate and manage any risk of money laundering, terrorism financing and evasion of financial sanctions;
• conduct and update business-wide risk assessments, especially when launching new products, services or practices;
• appoint a compliance manager to supervise compliance with the regulation and with Regulation (EU) 2023/1113 and ensure employees are aware of their obligations;
• ensure, if they are the parent company, all their branches and subsidiaries in the EU and in non-EU countries comply fully with the legislation, even if legal requirements in the latter are lower;
• remain responsible for compliance even when tasks are outsourced.

Customer due diligence

Obliged entities:

• apply customer due diligence measures, including when:
  • establishing a business relationship,
  • carrying out an occasional transaction of at least €10,000,
  • suspecting money laundering or terrorist financing;
• verify:
  • the identity of the customer and of the beneficial owner(s) as part of the due diligence process,
  • the purpose and intended nature of the business relationship;
• monitor business relationships on an ongoing basis;
• refuse to carry out a transaction, or else terminate any business relationship if they cannot satisfy the due diligence requirements, and report any suspicions;
• report any discrepancies they find between the beneficial ownership information they collect and that held in the beneficial ownership central register;
• apply stricter due diligence measures to manage and mitigate any risk involving non-EU countries the European Commission identifies as having weak anti-money laundering and terrorism financing measures and lists as high-risk third countries;
• must apply more stringent controls in higher risk cases involving a transaction that is complex, is unusually large, does not appear to have an economic or lawful purpose or involves assets of at least €5 million;
• may apply simpler due diligence controls for low-risk business relationships and transactions based on customer, product and geographical factors set out in Annexes II and III;
• implement specific measures for politically exposed persons².

Beneficial ownership transparency

Beneficial ownership

In the case of a legal entity, beneficial owners are those that have, directly or indirectly, an ownership interest (25 % or more of the shares or voting rights) in the corporate entity, or that control, directly or indirectly, the corporate or other legal entity through ownership interests or other means. The regulation also specifies who the beneficial owner is in the case of an express trust, a similar legal arrangement and a legal entity similar to an express trust.

Legal entities:

• if created in the EU, must hold accurate and up-to-date beneficial ownership information;
• if created outside the EU, must submit beneficial ownership information to a Member State’s central register when they:
  • enter a business relationship with an obliged entity,
  • acquire real estate in the EU,
  • purchase for non-commercial purposes a motor vehicle for over €250,000, or a boat or aircraft for over €7.5 million,
  • receive a public contract from a national authority.

Member States:

• notify the Commission by 10 October 2027 of the types of legal entities and legal arrangements in their jurisdiction;
• establish penalties for violations of rules on beneficial ownership transparency.

Reporting obligations

Obliged entities:

• report to the financial intelligence unit (FIU) – a national body collecting information on suspicious or unusual financial activity – any suspicions that funds or activities are linked to crime or terrorist financing;
• provide the FIU, at its request, all information, including transaction records, within the set deadline;
• keep all relevant documents for five years.

Traders in high-value luxury goods and financial institutions, where relevant, must report to the FIU all sales for non-commercial purposes of motor vehicles, boats or aircraft according to the thresholds above.

Measures to mitigate risks deriving from anonymous instruments

Anonymous accounts

• Credit institutions, financial institutions and crypto-asset service providers are not allowed to keep anonymous bank and payment accounts, passbooks, safe-deposit boxes or crypto-assets accounts.
• Owners and beneficiaries of the above anonymous accounts are subject to due diligence checks before these are used in any way.
• Credit and financial institutions must not accept payments made by anonymous prepaid cards issued in non-EU countries.

Large cash payments

• Cash payments for goods and services, in one or several transactions, are limited to €10,000.

Other measures

The regulation:

• provides for cooperation between FIUs, the European Public Prosecutor’s Office and the European Anti-Fraud Office;
• gives the Commission the power to adopt delegated acts to update technical aspects of the regulation;
• requires the Commission to:
  • assess, by 10 July 2030, the necessity and proportionality of lowering the beneficial ownership thresholds and of including certain categories of high-value goods in the scope of the legislation,
  • review the application of the regulation by 10 July 2032, and every three years thereafter;
• instructs the new Authority for Anti-Money Laundering and Countering the Financing of Terrorism to draft a number of implementing acts and guidelines.