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As of the 24th April 2024, the European Parliament formally endorsed the upcoming Anti-Money Laundering (‘AML’) Package. This package is anticipated to standardise AML rules across the European Union (‘EU’), taking into consideration various potential loopholes which could be utilised by criminals to launder funds. This new package is anticipated to also improve the way national systems within Member States are organised and to promote cooperation between them to tackle money laundering and terrorist financing.

This new package will transfer all rules applicable to the private sector to a new Council Regulation (‘AML Regulation’), with the AML Directive (Directive EU 2015/849) being left to consider the organisation of institutional AML/CFT systems at a national level in the Member States of the EU.

The new AML Regulation expands the definition of the term “obliged entities” to consider new entities such as cypto-asset service providers. The aim of this amendment is that such entities would also be obliged to conduct due diligence on their customers, verify the information received about their clients and report any suspicious activities. Customer due diligence will be required to be carried out in relation to transactions exceeding € 1,000. The AML Regulation also incorporates measures to mitigate risks in relation to transactions with self-hosted wallets.

Other areas which will be tasked with carrying out with customer due diligence and reporting obligations would be individuals trading in luxury goods. These will involve goods such as precious metals, precious stones, jewellers and horologists, but also traders of luxury cars, airplanes and yachts. The provision agreement between the European Council and the European Parliament recognises the football sector as a high-risk and includes professional football clubs and agents. Enhanced due diligence measures will also be required to be undertaken whenever a business relationship is entered into with high net-worth individuals, and which involve a significant amount of assets.

It is also being proposed that an EU-wide limit of €10,000 be set for cash payments and that obliged entities would also be required to identify and verify any person who carries out an occasional transaction of over €3,000 in cash.

The rules on beneficial ownership of legal entities have also undergone a number of changes. Under these new changes, the provisions relating to beneficial ownership transparency incorporate more detailed and harmonised rules to identify the beneficial owner as well as clearly set out the type of information required to identify the beneficial owners with the aim of ensuring consistent application across the EU.

Obliged entities shall also apply enhanced due diligence measures to any occasional transactions which involve high-risk third countries where their national AML/CFT measures create a threat to the integrity of the EU’s internal market.

Changes are also being made to the AML Directive. One such change is that entities or arrangements which are associated with persons or entities which are subject to targeted financial sanctions will need to be flagged. The Directive also allows entities in charge of beneficial ownership registers to carry out inspections at the premises of the legal entities. An interesting addition to the Directive is that of allowing members of the general public having a legitimate interest, such as members of the press or civil society, access to registers. Additionally, the Directive also provides that real estate registers are to be made accessible to competent authorities through a single access point.

The Directive has also referred to the financial intelligence units (“FIUs”). In this preliminary agreement, FIUs will have immediate and direct access to information relating to financial, administrative and law enforcement, which includes tax information, information on funds and other assets frozen pursuant to targeted financial sanctions, information on transfers of funds and crypto-transfers, national motor vehicles, aircraft and watercraft registers, and customs data. FIUs are also required to continue to distribute information to competent authorities tasked with combating money laundering and terrorism financing.

The new package also introduces a new authority, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism established in Frankfurt, which would be charged with supervising the riskiest financial entities and be empowered to intervene where any supervisory failures occur and to act as a central hub for supervisors and mediating disputes between them.

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr Zachary Galea