News

All eyes on the new Anti-Money Laundering Package of legislative proposals

23 July 2021

The long-awaited  package of legislative proposals to strengthen the EU’s anti-money laundering and combating the financing of terrorism (AML/CFT) rules has been presented by the European Commission. The package aims for harmonisation across the EU of AML and CFT rules. It also proposes the creation of an EU authority to fight money laundering.

Sectoral efforts to have a say in the new AML/CFT policies

Philanthropy Advocacy has strongly supported the important fight by the EU against money laundering and terrorism financing in its joint contribution to the consultation on the new AML policies, submitted in 2020. However, we underlined that the implementation of the EU AML and CFT policies has unintended negative consequences and a chilling effect on the important work of NPOs, including philanthropy, in delivering aid and benefit to the public good. Negative effects that we have observed are, for example, overly tight reporting requirements, barriers to cross-border philanthropy, banks not serving parts of the sector and unjustified freezing of bank accounts.

Furthermore, during a webinar organised by PA and our partners in March 2021, a number of NPO sector representatives as well representatives of the European Commission convenes to highlight some of the key concerns related to the existing over-implementation of the current AML/CFT legislation in some countries, such as to consider NPOs/foundations as “obliged entities” or subjecting the sector to unnecessarily tight reporting requirements without taking a risk-based approach. Particular focus was given to unintended consequences such as bank de-risking and a chilling effect on the important work of civil society and philanthropy. Furthermore, governments were not consistent in their interpretation of “beneficial owners” in the case of public benefit organisations. More clarification of those concepts were hoped for with the new AML policy approach. Overall, the call for further clarification of the key concepts of AML/CFT legislation as “obliged entity” and “beneficial owner” was made.

New AML/CFT package

The legislative package proposes a regulation that will transfer existing and strengthened AML provisions from previous directives. Furthermore, the package proposes setting up an EU Anti-Money Laundering Authority (AMLA) that will enhance the enforcement and harmonisation in the EU as the rules will be directly applicable across the EU without the need for further transposition in national law. The Authority will be able to directly supervise the riskiest financial entities. New measures also aim at enhancing the existing EU framework by taking into account new and emerging challenges linked to technological innovation.

New AML/CFT's package consists of four legislative proposals:

The new agency (AMLA) operational from 2023 will have three main tasks:

  • Direct supervision of financial transactions of selected “obliged entities” operating across many EU Member States,
  • Close cooperation with and coordination of the national supervisors and
  • Cooperation with national financial intelligence units, facilitating full and rapid information exchange.

So far, obliged entities are mostly financial market players such as banks, but the European Commission now proposes to expand the field and include sectors that could be involved in aiding money laundering like lawyers, estate agents, antique and art dealers and accountants, at least in a corporate context.

Interestingly, the most controversial proposal, especially for the European Council, could turn out to be the attempt to introduce an EU-wide minimum cap on cash transfers. Some Member States have very low caps already - €500 in the case of Greece - others, like Germany, have no cap at all. The Commission is proposing a cap of €10.000 (with some possible exemptions on peer-to-peer transactions such as used car sales).

Beneficial ownership

The provisions on beneficial ownership information in the Regulation clarify and expand those in the current EU AML/CFT legislation, including the concept of beneficial ownership and the requirement for all corporate and other legal entities to obtain and hold adequate, accurate and current beneficial ownership information.

The proposals include more detailed and harmonised rules to clarify the type of information needed to identify beneficial owner(s). The new rules clarify not only the obligations for legal entities and trustees to identify and verify their beneficial owners, but also their requirement to report that information to national beneficial ownership registers.

They also introduce an obligation for non-EU legal entities that have a link with the EU to register their beneficial ownership in the EU's beneficial ownership registers. In relation to the registers, the proposal still allows the collection of data in accordance with national systems, but will increase the adequacy, accuracy and timeliness of beneficial ownership data available in the registers through harmonised rules. In addition, the entities in charge of the national beneficial ownership register will receive more powers in order to verify that the information submitted to the beneficial ownership register is accurate, adequate and up-to-date, including on-site checks.

The European Commission maintains that public access to beneficial ownership information can allow greater scrutiny of information by civil society, including by the press or civil society organisations and contributes to preserving trust in the integrity of the financial system. It can contribute to combating the misuse of corporate and other legal entities and legal arrangements for the purposes of money laundering or terrorist financing.

PA will work on a more in-depth analysis of the new AML/CFT legislative package and take a position on individual aspects.