EU Proposes Significant Changes to Anti-Money Laundering Laws

Policy makers in Europe continue to explore responses to the Panama Papers revelations and recent terrorist attacks. On 28 February, European law makers approved important amendments to the EU’s Anti-Money Laundering (AML) Directive, 2015/849 (the “Directive”) that would implement new rules to combat money-laundering, terrorism financing and tax evasion.

The amendments would include:

• Expansion of AML obligations to trusts and certain virtual currency platforms;
• Public access to registers of beneficial ownership information; and
• Lower value thresholds for regulation of pre-paid instruments.

AML Obligations for Trusts and Virtual Currencies.  First, the amendments will bring trusts and certain virtual currency platforms under the purview of the Directive. These entities will join the list of other obliged entities – such as credit institutions, financial institutions, accountants, certain notaries, estate agents, and providers of gambling services – in being subject to risk assessment requirements related to money laundering and terrorist financing. Under the amendments, trusts and virtual currency platforms will now have the same obligation to do customer due diligence to identify beneficial owners and monitor financial transactions in most circumstances.

Public Access to Beneficial Ownership Information.  Second, the amendments will allow EU citizens to view national public beneficial ownership registers without having to demonstrate a “legitimate interest” in the information. This will give citizens access that had previously been limited to authorities and professionals such as lobbyists and journalists.  “Complex company structures and shell companies make it easy for people to hide money.  Through a public register for companies and trusts, the European Parliament wants to shed light on these structures and combat them” said Judit Sargentini, one of the law makers working on the amendments.

Lower Thresholds for Pre-Paid Instruments.  Finally, the amendments lower the threshold at which identification requirements for anonymous pre-paid instruments kick in from €250 to €150. The committee members hope that such a change would make it more difficult to use items such as pre-paid cards for criminal purposes, not least since it came to light that prepaid cards were used by the perpetrators of the November 2015 Paris terror attacks.

Next Steps.  The amendments must be given the go-ahead following a “trialogue” between the EU Parliament, Commission and Council.  This is expected over the summer, at which point the amendments will become law provided there are no roadblocks.