Implementation Day for the Fourth Money Laundering Directive – strengthening the EU’s anti-money laundering regime
June 26, 2017
Today marks the implementation date for the EU’s Fourth Anti-Money Laundering Directive (4MLD). 4MLD has been hailed as the instrument necessary to strengthen the EU’s defences against money laundering and terrorist financing. Its implementation requires “obliged entities” (the regulated sector) to assess their existing anti-money laundering (AML) policies and consider their own unique risk profile.
The key changes that you should be aware of are:
- Risk based approach – a more robust emphasis on employing a risk-based approach to money laundering at every level;
- Politically exposed persons (PEPs) – domestic individuals holding prominent positions will now also be classified as PEPs and obliged entities must carry out enhanced due diligence when transacting with these PEPs;
- Due diligence – simplified customer due diligence will no longer be sufficient in most circumstances and there will essentially be no blanket exemption from customer due diligence;
- Beneficial ownership – All entities across the EEA (including LLPs, Scottish LPs and in some instances Trusts) must disclose with local Companies registries and maintain statutory registers evidencing ultimate beneficial ownership;
- Tax crimes offences – tax crimes in respect of money laundering are categorised as a predicate offence for the first time in the EU;
- High value dealers – will now need to carry out customer due diligence for high value cash transactions of €10,000.00 or more; and
- Gambling sector – all entities in the gambling sector will now be required to ensure their KYC checks and AML framework are effective with a clear allocation of responsibilities and records of customer due diligence.
You must ensure that your business is ready for these changes and does not fall foul of the new requirements, as the implementation of the 4MLD is likely to generate a reinvigorated focus on compliance and controls in this space. Criminal and financial sanctions will apply for non-compliance.
For those organisations which have previously taken steps to comply with the 3MLD there will be considerably less practical changes to make. However, for those who have not previously been caught by the 3MLD and for those whose policies, procedures and controls are lacking, the time and cost investment required may be significant. The time to act is now.