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

8/36: 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

Enhanced customer Due Diligence (EDD) (Articles 18,18a to 24) and Annex III

In the cases referred to in Articles 18a to 24, as well as in other cases of higher risk that are identified by Member States, Member States must require obliged entities to apply enhanced customer due diligence measures to manage and mitigate those risks appropriately (Article 18(1)).

Articles 18a to 24 deal with respectively: Article 18 (high-risk third countries, and certain types of transactions), Article 19 (cross-border correspondent relationships involving the execution of payments with a third-country respondent institution), Article 20 (transactions or business relationships with politically exposed persons, Article 21 (politically exposed persons and beneficiaries of a life or other investment-related insurance policy) Article 22 (former politically exposed person) Article 23 (family members or persons known to be close associates of politically exposed persons) and Article 24 (shell banks prohibition).

Obliged entities must examine, as far as reasonably possible, the background and purpose of all transactions that fulfil at least one of the following conditions (i) they are complex transactions,(ii) they are unusually large transactions (iii) they are conducted in an unusual pattern and (iv) they do not have an apparent economic or lawful purpose (Article (18(2)).

When assessing the risks of money laundering and terrorist financing, Member States and obliged entities shall take into account at least the factors of potentially higher-risk situations set out in Annex III such as:

Customer risk factors: (c) legal persons or arrangements that are personal asset-holding vehicles; (d) companies that have nominee shareholders or shares in bearer form; (e) businesses that are cash-intensive; (f) the ownership structure of the company appears unusual or excessively complex given the nature of the company's business; (g) customer is a third country national who applies for residence rights or citizenship in the Member State in exchange of capital transfers, purchase of property or government bonds, or investment in corporate entities in that Member State (Article 18.(3)).

Cross border correspondent relationships (Article 19)

With respect to cross-border correspondent relationships involving the execution of payments with a third-country respondent institution, credit institutions and financial institutions must amongst other measures, when entering into a business relationship:

(b)       assess the respondent institution's AML/CFT controls;

(d)       document the respective responsibilities of each institution;

(e)       with respect to payable through accounts, be satisfied that the respondent institution has verified the identity of, and performed ongoing due diligence on, the customers having direct access to accounts of the correspondent institution, and that it is able to provide relevant customer due diligence data to the correspondent institution, upon request (Article 19).

Transactions or business relationships with PEPs (Article 20 and Article 20a)

In relation to transactions or business relationships with politically exposed persons (PEPs), in addition to the CDD measures set out in Article 13 (CDD measures above), Article 20 specifies additional tasks that an obliged entity must undertake.

Listing of prominent public functions by Member States by the Commission and by international accredited organisations (Article 20a)

Each Member State must issue and keep up to date a list indicating the exact functions which qualify as prominent public functions for the purposes of Article 3(9) (PEPs). Member States shall request each international organisation accredited on their territories to issue and keep up to date a list of prominent public functions at that international organisation for the purposes of Article 3(9).

The Commission must compile and keep up to date the list of the exact functions which qualify as prominent public functions at the level of Union institutions and bodies. That list shall also include any function which may be entrusted to representatives of third countries and of international bodies accredited at Union level (Article 20a(2)).

PEPs which are beneficiaries of life or other investment related insurance policies (Article 21)

obliged entities must take reasonable measures to determine whether the beneficiaries of a life or other investment-related insurance policy and/or, where required, the beneficial owner of the beneficiary are politically exposed persons. Those measures shall be taken no later than at the time of the payout or at the time of the assignment, in whole or in part, of the policy. Where there are higher risks identified, in addition to applying the customer due diligence measures laid down in Article 13, Member States shall require obliged entities to:

(a)       inform senior management before payout of policy proceeds;

(b)       conduct enhanced scrutiny of the entire business relationship with the policyholder (Article 21).

Former PEPS (Article 22)

Where a PEP is no longer entrusted with a prominent public function by a Member State , a third country, or an international organisation, obliged entities shall, for at least 12 months, be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk.

Extension to family members or close associates of PEPS (Article 23)

The measures referred to in Articles 20 and 21 shall also apply to family members or close associates of PEPs (Article 23).


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