Tim Kendal

Tim Kendal

Barrister

EU member states will have two years to implement the new Anti-money Laundering directive that came into force on the 26th June 2015.

The directive will apply to a number of businesses, including auditors, accountants, banks and other financial institutions. The changes are designed to strengthen the rules against money laundering and ensure consistency of approach at an international level.

Reduced cash threshold

Businesses that receive or make cash payments for goods worth at least €10,000 (and not €15,000 as previously) will also have to comply. This applies whether payment is made in a single transaction or a series of linked payments.

New Due Diligence

Businesses will be obliged to adopt new customer due diligence measures and to report suspicious transactions. There will be the requirement to maintain records of payments, and the adoption of internal controls designed to combat money laundering and terrorist financing activities – and the new Directive includes a predicate offence “tax” crimes.

Central Register of Ultimate Beneficial Owners

The directive requires EU government to set up and maintain registers of the ultimate beneficial owners of businesses which will be accessible to:

  • the authorities in each country
  • entities obliged to perform due diligence on customers – e.g. banks
  • others who can demonstrate a legitimate interest in the information – for example investigative journalists.

The information relating to ultimate beneficial ownership will, at the least, include the following:

  • name
  • month and year of birth
  • nationality
  • country of residence
  • nature and approximate extent of the beneficial ownership

Reduced Gambling Threshold

Gambling services, regarded as posing higher risks, requires providers to conduct due diligence for transactions of €2,000 or more

Sanctions

Failure to comply with the new rules will result in severe penalties (what the Europeans call “dissuasive”). The Directive provides for a maximum fine of twice the value of the benefit or at least €1million derived from a breach of the regulations.

Failure to comply with the rules, in the case of a credit or financial institution, will result in:

  • a maximum fine of at least €5million or 10% of the total annual turnover in the case of a legal person
  • a maximum fine of at least €5million in the case of a natural person.

It’s fair to say that any one caught by the new regulations can expect to receive extensive scrutiny by the authorities. The proposed changes set the agenda, which is of-a-piece with global trends towards financial transparency in the areas of money laundering, terrorist finance, tax evasion and bribery and corruption, for the authorities. Failure to comply with the new rules will hurt. A LOT!

You can read the text of the directive here.

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