AML Update: Political agreement on new Regulation and Directive
The EU Council and European Parliament have finally reached provisional political agreement on the ‘single rulebook’ AML Regulation, and the related AML Directive, which form part of the European Commission’s 2021 AML proposal.
The Commission’s proposal comprised four limbs: the regulation and directive, together with a proposal for an EU single AML/CFT supervisor (AMLA) and changes to the Wire Transfers Regulation. Political agreement was reached on AMLA in Q4 2023 (read our insights here and here) and the changes to the Wire Transfer Regulation (read our insights here) were published in the Official Journal in June 2023 and apply from 30 December 2024 (in parallel with much of MiCA).
- Crypto-Asset Service Providers (CASPs): CASPs will be brought into scope as obliged entities. They will need to apply customer due diligence (CDD) when carrying out transactions ≥ €1000 and enhanced CDD will apply to cross-border correspondent relationships.
- Cash Payments: subject to limited exceptions, a €10,000 limit will apply to cash payments (Member States may impose a lower maximum limit). Obliged entities will also need to identify and verify persons who carry out occasional cash transactions between €3,000 and €10,000.
- Beneficial ownership: the concepts of ownership and control will remain critical to the assessment of beneficial ownership. The beneficial ownership threshold will remain at 25%. There will be additional verification requirements in relation to information submitted to central beneficial ownership registers, but we will need to see the provisionally agreed text before the scope of any such requirements can be confirmed. Requirements to flag entities or arrangements that are associated with persons or entities subject to targeted financial sanctions will also be introduced, and registrars will have the power to inspect the premises of legal entities who have submitted information to the registers where inaccuracies are suspected. As expected, those with a legitimate interest (such as the press) will be allowed to access the central registers of beneficial ownership, in addition to supervisory and public authorities and obliged entities.
- Real Estate: additional requirements will be imposed regarding the registration of the beneficial ownership of all foreign entities that own real estate (this will apply retrospectively from 1 January 2014). It appears that agreement has also been reached on the need for a single access point for information on real estate (the usual information that would appear regarding ownership and charges, and also information on price).
- High Net Worth Individuals: credit institutions and financial institutions will need to undertake enhanced CDD when business relationships with very wealthy (high net-worth) individuals involve the handling of a large amount of assets.
- Other New Obliged Entities: traders of luxury cars, airplanes, yachts and cultural goods will become obliged entities. From 2029, professional football clubs and agents will also become obliged entities, but their position as obliged entities may be re-evaluated at a later date if they are seen to present a lower risk.
We will publish more detailed insights once the provisionally agreed texts are available (and the timeframes for the application of the new provisions are confirmed). Next steps are formal approval by both the Parliament and the Council, followed by publication in the Official Journal. In the meantime, please get in touch with your usual contact in our Financial Regulation Group with any queries.