On December 20th, 2016 the European Council came to an agreement regarding its negotiating stance on reinforced EU rules designed to prevent money laundering and the financing of terrorism. The directive comes as a direct response to the increased threat of terrorism and it seeks to balance the need for tighter security with the need to ensure the protection of fundamental rights and economic freedom. It’s two aims are:
- preventing the financial system being used for the funding of criminal and illicit activities;
- strengthening and enhancing transparency rules to prevent the large-scale concealment of funds
It is hoped that the proposal will limit the financial means of criminals, whilst not impeding the business and economic activities of legitimate individuals and businesses. The proposal is part of an EU action plan and responds to the April 2016 Panama Papers revelations.
Amendments to the Directive include:
- Lowering the threshold for identification of holders of prepaid cards from €250 to €150 and extending the customer verification requirements. Customer due diligence controls will now be applied to virtual currency exchange platforms and custodian wallet providers in order to end the anonymity previously associated with such exchanges;
- Encouraging and improving communication between member states Financial Intelligence Units (FIUs). Account holders will become easily identifiable as all information will be stored on centralised bank and payment account registers;
- Third countries, in particular, ones considered as high-risk will see an increase in the number of checks carried out and the amount of due diligence required;
- Beneficial ownership registers will see access being enhanced to provide greater transparency on the ownership of companies and trusts. Registers will be interconnected to facilitate greater cooperation between member states. Access will be granted to members of the public on the basis of proving a legitimate interest in acquiring the information.
In order to be implemented, the directive must gain the support of a qualified majority in European Parliament and then member states will have 12 months to transpose it into their national laws and regulations with this being extended to 24 or 36 months in the case of certain provisions relating to beneficial ownership registers.
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