Anti-Money Laundering
AML directives and regulations affecting due diligence and customer verification in business information services
Overview
Anti-Money Laundering (AML) regulations refer to a set of laws and regulations designed to prevent and combat money laundering activities. Money laundering is the process by which individuals or entities attempt to conceal the origins of illegally obtained funds, making them appear to be legitimate. On January 17, 2024, the Council of the European Union and the European Parliament announced that a political agreement had been reached on a new Regulation setting forth a single anti-money laundering and countering the financing of terrorism (AML) rulebook (AMLR) and a sixth AML Directive (AMLD 6). Key changes introduced by the AML/CFT single rulebook:
Key Points
- 1
Enhanced Due Diligence: Specific enhanced due diligence measures for cross-border correspondent relationships for crypto-asset service providers, business relationships with high net-worth individuals and those involving high-risk third countries
- 2
Cash Payments: An EU-wide limit of €10,000 for cash payments. Obliged entities must also identify and verify a person who carries out an occasional transaction in cash between €3,000 and €10,000.
- 3
Beneficial Ownership: Harmonised rules for identifying beneficial owners, including a 25% ownership threshold and improved rules for multi-layered and complex ownership and control structures. Acccess to beneficial ownership information is only possible under demonstrated legitimate interests.
- 4
Expanded Scope: The 6AMLD extended the scope of the EU AML framework to cover a broader range of activities and entities. It included virtual currency exchanges, custodian wallet providers, and entities involved in art trade and high-value goods together with new actors such as cryptos and football clubs .
- 5
Enhanced Customer Due Diligence (CDD): The directive introduced more stringent requirements for customer due diligence, especially for high-risk third countries. Financial institutions were expected to conduct thorough checks on the source of funds and wealth of their customers.
- 6
Centralized Registers: Member states were required to establish centralized registers of beneficial ownership for companies and legal entities. These registers aim to improve transparency and facilitate access to information on the ultimate owners of entities.
- 7
Improved Cooperation and Information Sharing: The 6 AML and the AML regulation emphasized the need for enhanced cooperation and information sharing among financial intelligence units (FIUs) across EU member states. This collaboration is crucial for detecting and preventing money laundering activities.
FEBIS Position
FEBIS members are instrumental in providing updated, accurate and comprehensive information on businesses, which is not only used for creditworthiness assessment, but also by obliged entities having to comply with provisions of the AML directive, anti-bribery laws etc. and more generally by businesses that have implemented due diligence processes before entering into/during a business relationship. The rules to access UBO (ultimate beneficial ownership) information haven changed with the 6th AMLD and the AMLR and public access has been removed. It is now conditioned to proven and demonstrated legitimate interests. BIPS can rely on art 12. j of the 6th AML Directive to justify of their legitimate interests but they need to demonstrate that in front of national UBO registers. Art 12-2-j of the 6th AMLD recognised legitimate interest to access UBO for providers of AML/CFT products, to the strict extent that products developed on the basis of the information referred to in paragraph 1 or containing that information are provided only to customers that are obliged entities or competent authorities.
Implications for Members
- •
FEBIS members facilitate B2B trade relations and transactions with a focus on credit and risk intelligence services. These services require updated, accurate and relevant business information to produce beneficial, tailor-made solutions as well as scorings to assess the risk of default of businesses. Furthermore, to help businesses in their KYC/KYS and onboarding processes by providing relevant information for identification, compliance to different regulations and laws such as AML and anti-bribery ones, credit checks, fraud fighting, and general economic and business transparency – trade counterparts / supply chain assessment.
- •
Getting full access to effective, updated, and accurate beneficial ownership information is key for business information providers, who act as a trusted third-party information provider for entities that have implemented due-diligence processes and have therefore a legitimate interest to access it. The Implementing Act on High Value Datasets also lists as key company datasets the accounting documents including the list of participating interests, subsidiary undertakings and associated undertakings, their registered office address and proportion of capital held, all of which are related to beneficial ownership information.
- •
The recognition of the legitimate interests of entities like BIPs to access UBO information for fight against fraud and AML has been done through the AMLD but is still being challenged by national interpretations and differing UBO registers access at national level.
Key Dates
19 June 2024
From Team:AML Package published in the Official Journal
1 July 2025
AMLA begins operations
10 July 2027
Main provisions of AML Regulation (EU) 2024/1624 and AMLD6 apply
January 2028
AMLA begins direct supervision of highest-risk obliged entities