Council Formally Adopts 5th Anti-Money Laundering Directive

The Council of the EU formally adopted the 5th EU Anti-Money Laundering Directive on Monday 14 May, following the political agreement between Council and Parliament of 15 December 2017. The 5th AML Directive seeks to prevent large scale concealment of funds and to introduce increased corporate transparency rules, whereby corporate and other legal entities will be required by law to publicly disclose information on the beneficial ownership.
• Transparency requirements for corporate entities and trusts
Under the new rules, member states shall be required to ensure compulsory public disclosure of certain information on beneficial owners in respect of companies and legal entities engaging in profit-making activities.
Conversely, public access requirements are not put in place in respect of trusts and other legal arrangements. The 5th AML Directive recognises that trusts may also be set up for non-commercial purposes, such as charitable aims, use of family assets, and other purposes beneficial to the community/ general public. Considering that such arrangements do not qualify as business benefits, the essential data on trusts’ beneficial owners shall only be granted to persons holding a legitimate interest. Similarly, the 4th AML Directive already grants competent authorities access to beneficial ownership of trusts and other legal arrangements, albeit in limited circumstances.
• Virtual currencies and verification
The 5th AML Directive introduces a requirement for member states to verify beneficial ownership information submitted to their beneficial ownership registers as well as an extension of anti-money laundering legislation applicability to virtual currencies.
• Third-countries
With respect to transactions involving third countries, the obliged entities shall apply enhanced customer due diligence measures set out in the directive. Member States will introduce such rules as a requirement for all transactions with natural persons or legal entities established in third countries identified as high-risk countries pursuant to Article 9 (2) of the Directive.
• Background
The 5th AML Directive stems from Commission’s Action Plan of July 2016 for strengthening the fight against money-laundering and terrorist financing, aiming to prevent illicit movement of funds or other assets and disrupting the sources of revenue. On 12 February 2016, the ECOFIN Council called on the Commission to initiate amendments to the 4th AMLD in the second quarter of 2016 the latest. The informal ECOFIN Council also called for action in April 2016 to enhance the transparency of beneficial ownership registers, to clarify the registration requirements for trusts, to speed up the interconnection of national beneficial ownership registers, to promote automatic exchange of information on beneficial ownership, and to strengthen customer due diligence rules. The EU’s AML revised framework that is in force at present was adopted on 20 May 2015, consisting of the 4th AML Directive and Regulation (EU) 2015/847 on information accompanying transfers of funds. The transposition deadline for the 4th AML Directive and the entry into force of Regulation (EU) 2015/847 was set for 26 June 2017. The EU’s supranational risk assessment was also published back in June 2017.

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