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The 4th EU Anti-Money Laundering Directive and YOU!

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The 4th EU Anti-Money Laundering Directive and YOU!

  1. 1. 4th Anti-Money Laundering Directive IDENTIFICATION AND NAMECHECK The 4th EU Directive … and You!
  2. 2. In line with 2012 FATF recommendations, rules on customer due diligence are refined and may vary depending on the risk: enhanced vigilance where the risks are greater, simplified measures where risks are lower. The 4th AMLD contains a non-exhaustive list of risk factors and variables to be taken into consideration when performing internal risk assessment and when determining simplified, enhanced or normal/standard DD measures. Note:  You need to identify, understand, assess, manage and mitigate ML/TF risks!  Consider: Customers, Products, Services, Transactions, Delivery Channels, Technologies, Geographical, Activity, Document, Relationship (reason and set-up), Behaviour, etc. This is an ongoing process, but also when changes occur, such as new business practices, products, technologies, etc. Focus on risk assessment and corresponding Risk Based Approach (RBA) 4th Anti-Money Laundering Directive
  3. 3. Ultimate/beneficial owners of companies, foundations, holdings or trusts will be listed in national central registers in each EU country registers to be interconnected across the EU. Competent authorities and entities subject to the Directive will have access to the register, as well as any person demonstrating "a legitimate interest". Note: “Competent authorities”, “entities subject to the Directive” and “any person demonstrating a legitimate interest" are terms that are not defined by the Directive. In essence, it will be up to member states to decide who will have access to these registers. Beneficial Owners: Increased transparency through creation of national central registers 4th Anti-Money Laundering Directive
  4. 4. In case BOs cannot be identified, and there are no grounds for suspicion, the senior managing officials of the legal entity can be considered as Bos Increased protection and privacy of BOs in case of potential negative exposure should be warranted (risk of kidnapping, blackmail, intimidation, etc.) Determine whether BOs are PEPs Note: A BO is still considered as a natural person who owns or controls the legal entity and threshold remains unchanged at 25%. It will be up to the member states to decide whether lower percentages should apply. Beneficial Owners: what’s new? 4th Anti-Money Laundering Directive
  5. 5. The Directive now puts domestic PEPs in scope of enhanced vigilance measures. PEPs must remain PEPs for at least 12 months after the end of the relevant prominent function (previously up to 12 months). The Directive is proposing to allow a risk-based decision to set adequate time limits (case per case), thus challenging the idea of “once a PEP – always presumed a PEP”. Note: The overall thought is that the handling of an “ex-PEP” should be based on an assessment of risk and not on prescribed time limits. PEPs should not be stigmatised as being involved in criminal activity. Hence, refusing a business relationship with a PEP on these grounds is contrary to the spirit of the Directive and of the revised FATF Recommendations. PEPs - Politically Exposed Persons 4th Anti-Money Laundering Directive
  6. 6. Tax crimes now within predicate offences Tax crimes relating to direct and indirect taxes are now expressly considered by the Directive as predicate offences. Note: Although tax crimes have been predicate offences for some countries in Europe, this has not been the case with many other jurisdictions. The Directive adds tax evasion and other serious fiscal offences to the list of predicate offences. Third party KYC (Consideration of DD Outsourcing) In order to avoid repeated customer identification procedures, leading to delays and inefficiency in business, it is appropriate, subject to suitable safeguards, to allow customers whose identification has been carried out elsewhere to be introduced to the obliged entities (note: entities subject to the 4th AMLD). Where an obliged entity relies on a third party, the ultimate responsibility for customer due diligence remains with the obliged entity to which the customer is introduced. Note: This point includes responsibility for compliance with the Directive, the requirement to report suspicious transactions and maintain records 4th Anti-Money Laundering Directive
  7. 7. Third country policy With a view to establishing a common approach towards non-EU countries that have deficient AML/TF regimes ("high- risk third countries"), the European Commission is now specifically empowered to identify these countries. Beyond a foreseeable "name and shame" effect, the presence of customers originating from a country in this list may put significant burden on obliged entities by requiring additional controls. Note: Enhanced CDD required! Use of large cash is vulnerable to ML/TF Trading in goods and making or receiving cash payments to be below €10,000. Note: This threshold was originally set at €7,500 and praised as “going beyond FATF requirements”. Member states to adopt lower thresholds and limitations to the use of cash. 4th Anti-Money Laundering Directive
  8. 8. Transfer of Funds EU Regulation 2015/847 The Regulation on wire transfers tightens the existing Regulation and aims to increase the traceability of payments by making it mandatory to include the information on payees such as the name of the payee and the payee’s account number. Payment Service Providers will need to verify the identities of beneficiaries for payments that are originating outside of the EU for amounts over €1,000, to put in place risk-based procedures to determine when to execute, reject or suspend transfers. Note: Adding to this, is the general approach of the 4th AMLD, which reads that taking into account the development of new payment instruments charged with electronic money, the Directive foresees the possibility for member states to waive most of customer due diligence requirements. Obviously, this is subject to limitations and risk-mitigation conditions such as adequate transaction monitoring. We feel this latter point will be of prevalent importance going forward! 4th Anti-Money Laundering Directive
  9. 9. Suspicious transactions Banks , auditors, lawyers, accountants, real estate agents, casinos etc. to be more vigilent about suspicious transactions use the Risk Based Approach. Note: The aim is to make dodgy deals harder to hide and fight tax evasion. General comment: With the 4th AMLD in mind, here are some key requirements that you need to consider during your KYC process:  Client due diligence  Record keeping  Suspicious activity reporting  Internal controls in place  Data protection 4th Anti-Money Laundering Directive
  10. 10. Assure You are compliant by:  Maintaining your organization compliant with latest AML legislation  Preventing your organization from facilitating money laundering and terrorist financing operations  Protecting your organization from reputational risk  Avoiding unnecessary sanctions and fines  Showing your authorities that you are in control  Avoiding too much manual intervention during the process – rather opting for automated solutions  Note: The publication date triggers a two year period where member states will be required to implement the 4th AMLD into national legislation. This would mean that the 4th AMLD should be effective by July 2017 at the latest. On the 4th EU AML Directive a member of the Economic and Monetary Affairs Committee quoted: "Today is a good day for law-abiding citizens, but a lousy day for criminals.“ This however, remains to be seen… 4th Anti-Money Laundering Directive
  11. 11. CDDS MAKES YOU COMPLIANT WITH YOUR AML/CTF OBLIGATIONS AMLspotter, an all-in-one solution that provides you:  AML risk management  Dynamic KYC / KYT  AML Risk Classification  Manual & Automated name screening  Recurrent monitoring  AML risk dashboard  Detailed reporting If you require more information on the subject or would like to discuss this with us, please call us on +352 20 21 16 20 or e-mail us on helpdesk@cdds.lu

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