In late July, the European Union (EU) unveiled an ambitious package of legislative proposals to strengthen its approach to anti-money laundering and combatting the financing of terrorism (AML/CFT). These proposed rules would impact the Know Your Customer (KYC) rules, Beneficial Ownership rules, as well as US rules in this area. Although these are not expected to become law in the EU countries until 2025, expect to see the new AML/CFT Authority (AMLA) by 2024 and the proposed legislation by the European Parliament being introduced over the coming 12-24 months. The new AMLA will coordinate the work of the states’ Financial Intelligent Units (FIUs).
The proposals, included in a press release in July, include:
1. Creating a new EU AML/CFT Authority that will transform AML/CFT supervision in the EU and enhance cooperation among financial intelligence units. AML/CFT supervision is presently based at the state level; this will provide a new umbrella organization at the EU level. It will directly supervise some of the riskiest financial institutions with operations across multiple EU countries, while establishing a single integrated system of AML/CFT supervision and coordinating supervisors of non-financial entities.
2. Introducing a single EU AML/CFT Rulebook that will apply directly to obliged entities in all member states. The full rulebook is expected to be in place and apply by the end of 2025.
3. Proposing a sixth Directive on AML/CFT (“AMLD6”) containing provisions that will be transposed into national law to impose higher standards for the operation of national AML/CFT regimes.
4. Revising the 2015 Regulation on Transfers of Funds to trace transfers of crypto-assets to extend the rules to the entire crypto sector, thereby obliging all service providers to conduct due diligence on their customers.
5. Limiting the cash payment in EU to €10,000 to limit criminals’ ability to launder money via hard-to-detect transactions. Some EU members already have this limitation in place.
6. Proposing the identification of third countries onto a ‘black-list’ or a ‘grey-list’ according to the determinations made by the Financial Action Task Force of which measures proportionate to the risks posed by the country will be applied.
The draft laws will now need to be scrutinized and agreed to by the European Parliament and Council in a process that could take upwards of 12 months. The future AMLA should be operational in 2024 and will start its work of direct supervision slightly later, once the Directive has been transposed and the new regulatory framework starts to apply.
If you have questions on how your business may be impacted by the proposed legislation, contact Moore Doeren Mayhew today.
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