EU Anti-Money Laundering Regulation Updates: A help or hindrance?
On 20 May 2015, the European Parliament of the European Union (EU) confirmed its position on the 4th Anti-Money Laundering Directive which has been adopted without amendment and will enter into force 20 days after its publication in the EU Official Journal. Member States will then have two years to incorporate it into their national laws.
The Directive has been drafted to expand the scope of the Anti-Money Laundering Regime in order to address the threats presented by new money laundering and terrorist financing techniques as well as to address vulnerabilities that currently exist.
The European Commission has set out new rules on customer due diligence as well as stringent requirements in relation to the transparency of beneficial owners in a bid to ensure full traceability of funds transfers within, to and from the European Union. It has also expanded on existing provisions dealing with politically exposed persons and will aim to go beyond the Financial Action Taskforce (FATF) recommendations and requirements bringing within its scope all persons dealing in goods or providing services (which now includes providers of gambling services) for cash payments of €7,500 or more – a reduction from the current €15,000 threshold that is certain to catch a dramatically increased number of transactions in its net.
As a result, not only will a greater number of firms fall subject to the regime, but banks or businesses who fail to act in accordance with the new rules, such as failing to conduct customer due diligence checks or failing to report suspicious transactions could face much harsher penalties such as fines of up to €5 million (or 10% of their annual turnover) and twice (or even ten times) the amount of profit gained (or losses avoided) through the breach once national laws have been updated to reflect the Directive.
It is clear that this latest drive to update Anti-Money Laundering Rules and Regulations will result in firms facing additional costs and ever more administrative and regulatory burdens. Commentators are suggesting that the new regulations will ‘do more harm than good’, and will ‘tie up mid-sized firms in unnecessary red tape’ which has led to increasing pressure for a review to assess whether the regulations could be applied in a way less damaging to legitimate UK business interests to avoid actively adding to the burdens. The outcome of which will be interesting considering the Government’s current crusade to reduce EU red tape.