In the past few years, many scandals related to money laundering have been recorded. For instance, the Panama Papers have shown how the rich and powerful use tax havens to hide their wealth. Big companies such as UBS and ABN AMRO are suspected of not complying with AML Directives by ignoring signals of high-risk clients' profile. Recently, the Commonwealth Bank has agreed to pay $700 m fine for committing anti-money laundering and terrorism financing law breaches.
These scandals reflect crucial issues faced by the modern financial system. The present article aims to give more insights on the current legal system with the proposal of the 5th AML Directive (AMLD 5).
What is AML ?
Anti-money-laundering is a set of procedures, laws and regulations designed to deal with practices related to income obtained from illegal activities.
Why adopting AML is a big deal for firms ?
A firm has the responsibility to make sure that its financial transactions with stakeholders, shareholders and third parties are not related to illicit actions. This practice helps it to not only to comply with legal arrangements but also to enhance multiple aspects of the company (reputational, operational, financial, compliance risks).
The Anti-Money Laundering European Directives framework
In July 2016, The European Commission, in the wake of terrorist attacks and the Panama Papers scandal, decided to strengthen the fight against terrorist financing and money laundering. Nowadays, modern technology services are becoming increasingly popular as alternative financial channels. However, some remain outside the scope of law requirements, which might no longer be legitimate. This is the reason why an up-to-date legal system is necessary. First, it is worth noting that the 5th AML Directive is an amendment of previous directives.
What are the challenges and opportunities of the Fifth Anti-Money Laundering Directive (5AMLD) ?
This year (2018), the 5th AML directive has been newly adopted by the Council of the European Union and should be implemented into national law of various Member States by January 2020. With an evolving financial landscape and especially the application of the General Data Protection Regulation, new challenges are faced by firms. The main amendments introduced are the following:
Extend AML and CTF to virtual currencies, tax related services and works of art
Improve checks on transactions involving high-risk third countries
Allow the anonymous use of electronic money products only in two situations
Directly in the shop for a maximum amount of €150
Online for a maximum amount of €50
Customers of a third country who apply for residence rights or citizenship in the Member State in exchange of capital transfers, should be considered as a factor indicative of a potentially higher risk
Establish a more transparent system on beneficial ownership
Build better connections between beneficial ownership registers to facilitate cooperation and exchange of information between Member States
Set up a centralized bank account register or retrieval systems
Enhance powers of EU Financial Intelligence Units and facilitate their cooperation
Enhance cooperation between financial supervisory authorities
