5th revision of the MLD will bring greater transparency of beneficial ownership and enhance other areas

A fifth revision of the Money Laundering Directive (“5MLD”) – the current European Directive 2015/849 is the fourth revision, which took into account the Financial Action Task Force recommendations of 2012 – was initially proposed in July 2016, adopted by the European Parliament in April 2018 and is to be adopted throughout Europe by July 2020.

This 5^th AMLD takes the form of an EU Directive rather than an EU Regulation, setting a goal that EU Member States must achieve while allowing them to devise their own laws on how to reach these goals.

It will enter into force 20 days following its publication in the Official Journal of the European Union (“EU”) and EU Member States will then have up to 26 months to adopt and publish the laws, regulations and administrative provisions necessary to comply with it.

The main changes to the 4^th AMLD are:

1. Improving transparency on the real owners of companies.
2. Improving transparency on trusts.
3. Better connection of the beneficial ownership registers.
4. Lifting the anonymity on electronic money products (prepaid cards).
5. Extending Anti-Money Laundering and Counter Terrorism Financing (“AML/CTF”) rules to virtual currencies, tax related services, works of art.
6. Improving checks on transactions involving high risk third countries.
7. Setting up centralised bank account registers or retrieval systems.
8. Enhancing the powers of EU Financial Intelligence Units (“FIUs”) and facilitating their cooperation.
9. Enhancing cooperation between financial supervisory authorities.

The main changes in more detail

• Improving transparency on the real owners of companies

The beneficial ownership registers for legal entities, such as companies, will be made public. The EU consider wider access to part of the beneficial ownership information will enhance public scrutiny and will contribute to preventing the misuse of legal entities for money laundering and terrorist financing purposes.

• Improving transparency on trusts

The access to data on the beneficial owner of trusts will be accessible without any restrictions to competent authorities, FIUs, the professional sectors subject to AML/CTF rules (banks, lawyers etc.) and will be accessible to other persons who can demonstrate a legitimate interest. In addition, when a trust is a beneficial owner of a company, access to this information can be requested via a written request.

• Better connection of the beneficial ownership registers

The national registers on beneficial ownership information will be interconnected directly to facilitate cooperation and exchange of information between Member States. In addition, Member States will have to put in place verification mechanisms of the beneficial ownership information collected by the registers to help improve the accuracy of the information and the reliability of these registers.

• Lifting the anonymity on electronic money products (prepaid cards)

Member States may allow the anonymous use of electronic money products only in two situations:

1. when customers use their prepaid instrument (such as prepaid cards) directly in a shop for a maximum transaction amount of EUR 150;
2. when customers carry out an online transaction with a prepaid card below EUR 50

• Extending AML/CTF rules to virtual currencies, tax related services, works of art

The AMLD will now apply to entities which provide services that are in charge of holding, storing and transferring virtual currencies, to persons who provide similar kinds of services to those provided by auditors, external accountants and tax advisors which are already subject to the 4th AMLD and to persons trading in works of art. These new actors will have to identify their customers and report any suspicious activity to the FIUs.

• Improving checks on transactions involving high risk third countries

Member States will have to ensure that the sectors dealing with countries presenting strategic deficiencies in their AML/CTF regimes listed by the European Commission apply systematic enhanced controls on the financial transactions from and to these countries. The list of checks is now harmonised to ensure there are no loopholes in the EU. In addition, the listing of the European Commission will include third-countries with low transparency on beneficial ownership information, no appropriate and dissuasive sanctions or which do not cooperate nor exchange information.

• Setting up centralised bank account registers or retrieval systems

Member States will be required to set up centralised bank account registers or retrieval systems to identify holders of bank and payment accounts, with the European Commission working on technical aspects to ensure the interconnection of such registers or retrieval systems.

• Enhancing the powers of EU FIUs and facilitating their cooperation

The FIUs will have access to more information through centralised bank and payment account registers or data retrieval systems. The European Commission expect FIUs from different EU countries will be able to cooperate more easily, as well as with other competent authorities.

• Enhancing cooperation between financial supervisory authorities

In light of the revelations of the Panama Papers in April 2016, the 5^th AMLD will further enhance the exchange of information and cooperation between financial supervisory authorities in full respect of their confidentiality rules, including with the European Central Bank.