Out-Law News | 07 Feb 2013 | 11:42 am | 2 min. read
A draft directive (60-page / 232KB PDF), intended to strengthen the EU's existing rules, proposes reducing the cash payment threshold from €15,000 as "there have been indications from certain stakeholders" that the current limit was "not sufficient". Anybody dealing in goods or providing services for cash above the new limit would have to comply with the proposed rules, which include the need to carry out customer due diligence and report suspicious transactions.
The new threshold goes beyond current requirements set by the Financial Action Task Force (FATF), the international anti-money laundering body. Other proposed changes would seek to improve the clarity and transparency of the rules on customer due diligence, expand the provisions dealing with politically-exposed persons and introduce a new mechanism for identifying a company's 'beneficial owners'. These are people who ultimately control a company, even if the legal ownership is in another name.
The directive would also extend the scope of EU anti-money laundering rules to cover "new threats and vulnerabilities", such as an explicit reference to tax crimes. It would also fully cover transactions in the gambling sector, expanding the current rules which only apply to casinos.
"The Union is at the forefront of international efforts to combat the laundering of the proceeds of crime," said Michel Barnier, Internal Market Commissioner. "Flows of dirty money can damage the stability and reputation of the financial sector, while terrorism shakes the very foundations of our society."
"In addition to the criminal law approach, a preventative effort via the financial system can help to stop money-laundering. Our aim is to propose clear rules that reinforce the vigilance by banks, lawyers, accountants and all other professionals concerned," he said.
The Commission has also published a draft regulation (26-page / 134KB PDF) governing the information that must accompany fund transfers. The drafts update and improve the existing third Money Laundering Directive, which dates back to 2005, and wire transfer rules. The Commission began a review of the existing regime in April 2012 following the publication of a revised set of international standards.
Money laundering occurs when the proceeds of criminal activity are concealed by using the financial system to disguise the source of the money or change its form. Criminal activity can include fraud, corruption, drug dealing and other serious crimes. Money laundering is usually criminalised alongside terrorist financing, which refers to the provision or collection of funds in any form with the intention that those funds will be used in order to carry out terrorist offences.
EU anti-money laundering provisions apply to banks and the whole of the financial sector as well as to lawyers, notaries, accountants, real estate agents, casinos and company service providers. It also covers dealers in goods, such as precious metals or stones, who handle cash payments.
Those covered by the rules must take steps to verify the identity of their customers and of the beneficial owners of their customers, in the case of companies. They must monitor the transactions of and their business relationship with customers, and report any suspicions of money laundering or terrorist financing to the relevant authorities. They must also establish appropriate internal preventative policies and procedures, and ensure all members of staff are adequately trained.
As well as providing a "clear mechanism" for identifying beneficial owners, the proposals would require companies to maintain a record of the identity of those who are really in control of the company. Due diligence rules would be simplified and improved, with a focus on "a better knowledge of customers and a better understanding of the nature of their business". Provisions dealing with higher risk 'politically exposed persons' will be expanded to include those living in EU member states as well as elsewhere, and those in international organisations.
The draft directive would also allow for closer cooperation between the different national Financial Intelligence Units (FIUs), which are the bodies that receive reports about suspicions of money laundering or terrorist financing. The changes will allow more effective exchanges of information, tracing, freezing, confiscation and repatriation of illegal assets and allow FIUs to coordinate sanctions in cross-border cases.