Recent European AML Law Updates

The fight against money laundering and terrorist financing remains a top priority for the European Union (EU). To further strengthen its regulatory framework, the EU has recently updated its Anti-Money Laundering (AML) laws. The AML Package has been adopted by the European Council and has been published in the EU's Official Journal (OJ) on 19June 2024. 

In this article, we will explore the keychanges introduced by the 6th Anti-Money Laundering Directive (AMLD 6),replacing the AMLD 4 and AMLD 5 and the proposed EU AML Regulation.

Moreharmonisation across EU with the new AML Package: AMLD 6 and AML Regulation

The EU’s latest AML measures involve a bindingAMLD 6 and the creation of a new, directly applicable EU AML Regulation whicheffectuates the establishment of an Authority for Anti Money Laundering andCountering the Financing of Terrorism (AMLA). These laws focus on closingloopholes in previous directives, enhancing enforcement, and harmonizing AMLpractices across EU member states.

AMLD 6

The AMLD 6, building on the framework of previous AML directives, introduces a number of key enhancements. Some of the mare discussed below:

• Central Beneficial Ownership Register: The change with respect to the central register of beneficial ownership forces organisations to submit correct and up to date information. Organizations  responsible for the registers are empowered to verify the data. Including performing inspections in case of doubt. On Dutch level per 1 October 2024,  Article 10c of the Wwft gives the duty to (re-)notify the Dutch Chamber of Commerce of any irregularities to organisations having access to the UBO-register directly or receiving extracts through their clients.
• Single Real Estate Access Point: AMLD 6 introduces a single access points to be established in each member state giving access to Financial Intelligence Units (FIUs) and other competent authorities to real estate information such as identification of real estate property and beneficial owners of that property.
• Central register for bank account information: In addition to the Central Beneficial Ownership Register and the Single Real Estate Access Point, the AMLD 6 also provides for the set-up of a central register for bank account information.
• More power to FIUs: As     to the FIUs AMLD 6 provides for enhanced powers. They will receive immediate access to a range of information on administrative, financial and law enforcement topics. FIUs will gain new powers related to timely  stopping illegal transactions. The cooperation between FIUs across the EU will be enhanced by introducing deadlines for responding to information requests and creating a clear legal framework for the operation of the FIU system. Additionally, joint analyses in cross-border cases will be possible.    
• Supervisors reporting to FIUs: The AMLD 6 further strengthens cooperation between national supervisors     of member states. The Directive provides for the set-up of supervisory colleges in both the financial and non-financial sectors to allow for an     exchange of information, assistance or coordination. In addition, the AMLA     provides assistance to the supervisory colleges by developing regulatory     standard for the functioning of the colleges.
• Risk Assessments: Both on EU level and national level the AMLD 6 broadens the scope of the risk assessments on Money Laundering and Terrorist Financing to be carried out by the European Commission and the member states to also cover the risks that result from not implementing or avoiding targeted financial sanctions. At the EU level, the Commission will conduct an assessment and draw up recommendations to member states on measures they should follow. At national level, member states need to carry out own risk assessments and     commit to effectively mitigating the risks identified in the national risk assessment.

EU AML Regulation

Next to the AMLD 6, the new EU AML package provides for the proposed EU AML Regulation, aims to standardize AML laws across all member states. This regulation due to its direct applicability, will replace national rules with a unified set of applicable rules, ensuring consistency and harmony.

Some key elements include:

• New AML Authority: The establishment of a new European AML Authority (AMLA), which will oversee high-risk financial institutions and ensure stronger enforcement across the EU. The AMLA will take over direct supervision of the most significant cross-border financial entities, while national authorities will remain     responsible for local institutions. AMLA will coordinate and support national Financial Intelligence Units (FIUs) and ensure collaboration between member states.
• Harmonized Risk-Based Approach: The regulation will impose a single EU-wide risk assessment model, ensuring  that all member states and institutions apply the same standards when assessing risks related to money laundering and terrorist financing.
• Expanded scope of Obligated Entities: The regulation expands the range of entities subject to AML obligations to among others crypto-asset service providers, high-value good dealers such as precious metals, and investment migration operators.
• Stricter Customer Due Diligence (CDD) Requirements: The AMLR strengthens the requirements for customer due diligence. Credit and financial institutions must undertake enhanced due diligence measures when business relationships with high net worth involve handling of a large amount of assets. Furthermore, on European level there will be  a limit of EUR 10,000 for payments in cash. Moreover, AMLR stipulates enhanced inspection for crypto-asset transfers, including the application of the "Travel Rule," which requires crypto transactions to include originator and beneficiary information.
• High risk third countries: The European Commission maintains and updates a list of countries that are     considered high-risk due to their weak or insufficient AML/CFT systems.     The Commission will make an assessment of the risk deriving from     third-countries’ legal and institutional systems, taking into account the     assessments made by the Financial Action Task Force (FATF) by among others     utilizing the grey and black lists from the FATF. However, the Commission     can also make autonomous assessments.
• Beneficial Ownership Transparency: The AMLR reinforces obligations to disclose the beneficial ownership of companies and trusts, including setting up national     registries that are interconnected across the EU. Authorities must ensure that beneficial ownership information is accurate and verified, enhancing the fight against shell companies and front entities. The Regulation includes more detailed and harmonised rules in this regard. It further clarifies that beneficial ownership can be based on two components - ownership interest and control – which must be assessed both independently and together.

Timeline

The AMLD 6 came into force twenty days following its publication in the OJ. EU member states must implement the AMLD 6 in their national legislation by 10 July 2027, at which point the current AMLD 4, as amended by the AMLD 5, will be replaced.

AMLR will start to apply directly three years aftercoming into force, which will be on 10 July 2027, with certain provisions applying a bit later.

Conclusion

The recent updates to European AML laws will significantly impact how businesses in the EU approach anti-money laundering compliance. The new EU AML Regulation will further harmonize AML laws across the EU, ensuring a level playing field and reducing regulatory fragmentation.

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