paul@paulfoleylaw.ie
22 Northumberland Road, Ballsbridge, Dublin 4
INTRO
INSIGHTS

6/36: The EU Anti Money Laundering and Terrorist Financing Regime

ARTICLE INTRO
By
Paul Foley

INDEX

Articles 1, 3 and 5
— Money Laundering and Terrorist Financing

Articles 2 and 4
— Obliged Entities


Articles 6 to 8

— Risk Assessments

Articles 9 and 18a
— High Risk Third Countries: Prescriptive Enhanced Due Diligence

Article 10
— Anonymous Accounts, Anonymous Passbooks, Anonymous Safe Deposit Boxes

Articles 10-14
— Customer Due Diligence

Article 15 to 17
— Customer Due Diligence
Applying Simplified Due Diligence (SDD)

Article 18, 18a-to 24
— Enhanced Customer Due Diligence (EDD)

Article 24
— Shell Banks

Articles 25 to 27
— Third Parties

Article 28
— Groups

Article 30
— Beneficial Ownership Information Corporates and Other Legal Entities

Article 31
— Trusts and other types of Legal Arrangements

Article 31
— Central Beneficial Ownership Register for Trusts

Article 31a
— Implementing Acts Technical Specifications and Procedures

Article 32
— Financial Intelligence Units (FIUs) FIU Establishment and Functions

Article 32a
— Centralised Automated Mechanisms for Identifying Persons Holding or Controlling Bank Accounts and Payment Accounts


Article 33

— Co-operation by Obliged Entities and their Staff with FIUs


Article 36

— Reporting obligation on NCAs and supervisory bodies


Article 38

— Protection for Individuals who Report Suspicions


Article 39

— Prohibition on Disclosure of Information


Article 40

— Record Retention


Article 45

— Group Wide Policies and Central Contact Point for eMoney Issuers and Payment Services Providers

Article 47
— Registration of Providers of Exchange Services between Virtual Currencies and Fiat Currencies

Articles 58 to 61
— Harmonising Member States Administrative Sanctions and Measures for Breach


Article 59

— Special provision for Credit Institutions and Financial Institutions


Article 60

— Publication of Decisions to impose Administrative Sanctions or Measures


WTR

— Wire Transfer Regulation

Articles 5 & 6
— Transfer of funds within and to outside the Union


Article 4

— Obligations of the Payer PSP


Articles 7 and 8

— Obligations of the Payee PSP


Articles 10 to 13

— Obligations on the Intermediary PSP


Article 13

— Assessment and Reporting


Article 2

— Where the WTR does not apply


Article 16

— Record Retention


Articles 41 and 43 MLD4 and MLD5

— Data Protection

Customer Due Diligence (Articles 10-14)

Transactions. obliged entities must carry out customer due diligence (CDD) where specified in Article 11 as follows:

  • (a) Establishing a business relationship (as defined in Article 3(13) of MLD4);

  • (b) Carrying out an occasional transaction that either: amounts to €15,000 or more, whether the transaction is carried out in a single operation or in several operations that appear to be linked; or constitutes a transfer of funds (as defined in Article 3(a) of the revised Wire Transfer Regulation 2015/847) exceeding €1,000;

  • (c) in the case of persons trading in goods, when carrying out occasional transactions in cash amounting to €10 000 or more, whether carried out in a single operation or in several operations which appear to be linked; 

  • (d) in the case of providers of gambling services, upon the collection of winnings, the wagering of a stake, or both, when carrying out transactions amounting to €2 000 or more, whether the transaction is carried out in a single operation or in several operations which appear to be linked;

  • (e) there is a suspicion of money laundering or terrorist financing,

  • (f) when there are doubts about the veracity or adequacy of previously obtained customer identification data.

Electronic money products and anonymous pre paid cards (Article 12).

The use of electronic money products is increasingly considered to be a substitute for bank accounts. Accordingly the derogations for electronic money products in Article 12(1) are very limited and  not applicable in the case of redemption in cash or cash withdrawal of the monetary value of the electronic money where the amount redeemed exceeds €50, or in the case of remote payment transactions as defined in Article 4(6) of the Directive (EU) 2015/2366 where the amount paid exceeds €50 per transaction (Article 12 (2)).

Anonymous prepaid cards  (Article 12)

Credit institutions and financial institutions acting as acquirers must only accept payments carried out with anonymous prepaid cards issued in third countries where such cards meet requirements equivalent to those set out in Articles 12(1) and 12(2). Member States can decide not to accept on their territory, payments carried out by using anonymous prepaid cards (Article 12(3)).

What CDD comprises (Article 13)

Obliged entities shall take into account at least the variables set out in Annex I to MLD4 when assessing the risks of money laundering and terrorist financing (Article 13(3)). CDD comprises:

identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source, including, where available, electronic identification means, relevant trust services as set out in the eIDAS Regulation (EU) No 910/2014 or any other secure, remote or electronic identification process regulated, recognised, approved or accepted by the relevant national authorities;

identifying the beneficial owner (as defined) including verify that person's identity, whether a natural or legal person, trust, company, or foundation and similar legal arrangement, and take reasonable measures to understand the ownership and control structure of the customer;

assessing and, as appropriate, obtaining information on the purpose and intended nature of the business relationship;

conducting ongoing monitoring of the business relationship as specified;

verifying that any person purporting to act on behalf of the customer is so authorised and identify and verify the identity of that person (Article 13(1)).

evidencing that the measures are appropriate. obliged entities must be able to demonstrate to competent authorities or self-regulatory bodies that the measures are appropriate in view of the risks of money laundering and terrorist financing that have been identified (Article 13(4)).

For life or other investment-related insurance business, credit institutions and financial institutions must establish and verify identity as set out in Articles 13(5).

In the case of beneficiaries of trusts or of similar legal arrangements that are designated by particular characteristics or class, an obliged entity must obtain sufficient information concerning the beneficiary to satisfy the obliged entity that it will be able to establish the identity of the beneficiary at the time of the payout or at the time of the exercise by the beneficiary of its vested rights (Article 13(6)).

When identity verification must take place (Article 13 and Article 14)

In addition to Articles 13(5) and 13(6), Article 14 in part contains rules on when identity must be verified.

Article 14(5) of MLD4 provides that obliged entities must apply CDD measures, at appropriate times, to existing customers on a risk-sensitive basis (i) When the relevant circumstances of a customer change; (ii) When the firm has any legal duty in the course of the relevant calendar year to contact the customer for the purpose of reviewing any relevant information relating to any beneficial owners; (iii) if the firm has had this duty under Council Directive 2011/16/EU (which provides for the mandatory automatic exchange of information in the field of taxation).

Unable to verify identity (Article 14.4)

If a firm is not able to identify and verify the identity of a customer or the customer’s beneficial owner, or to assess and obtain information on the purpose and intended nature of the business relationship it must: (i) not carry out a transaction through a bank account; (ii) not establish a business relationship or carry out a transaction; (iii) terminate the business relationship; (iv) consider making a suspicious transaction report relating to the customer to the relevant FIU in accordance with Article 33 (Article 14(4), MLD4).

Member States shall not apply the first subparagraph to notaries, other independent legal professionals, auditors, external accountants and tax advisors only to the strict extent that those persons ascertain the legal position of their client, or perform the task of defending or representing that client in, or concerning, judicial proceedings, including providing advice on instituting or avoiding such proceedings (Article 14(4) second paragraph).


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