The 5th Anti-Money Laundering Directive: An overview of the
changes to come
1. Coverage of virtual currencies
In the future, virtual currency exchange service providers and electronic wallet providers will be covered by the scope of 5AMLD. For the first time, the directive also contains a legal definition of virtual currencies in Art. 3 no. 18. Thereby, the European Union considers the high risks associated with virtual currencies, which are mainly due to the lack of regulatory measures so far.
2. Tougher requirements on prepaid cards
The maximum charging amount of non-reloadable prepaid cards will be lowered from EUR 250 to EUR 150. Furthermore, the maximum amount of a cash-refund will be halved from EUR 100 to EUR 50. These amounts can be lowered, but not increased, by member states. According to Sect. 25 i German Banking Act (Kreditwesengesetz, "KWG"), in Germany the maximum charging amount is EUR 100 and the maximum amount of a cash-refund EUR 20 - thus, already much stricter than the 5AMLD requires.
3. Easier Access to the Central Transparency Register
5AMLD grants each "member of the general public" access to the transparency register and thus to information about the beneficial owners of companies. A "legitimate interest" of the viewer is no longer required. The only exception thereof is made for trusts or similar legal arrangements. With respect to these, access is limited to competent authorities, professional sectors and persons who can demonstrate legitimate interest. The possibility to limit the access to the information in the register remains effective in individual cases and under certain conditions. In future addressees of the 5AMLD must inspect the transparency register before establishing new business relationships. This measure shall lead to a higher transparency of legal entities´ structures for third parties and will contribute to preventing the misuse of legal entities for illegal causes such as money laundering and terrorist financing.
4. Enhanced Due Diligence in respect of high-risk countries
The Commission keeps a regularly updated list of non-EU countries with deficiencies in their anti-money laundering and terrorist financing prevention regimes (so-called high-risk countries). European countries have to comply with increased due diligence when dealing with such countries. The new directive strengthens these obligations by obliging companies to obtain additional information from contracting parties in high-risk countries. In the future, business partners will have to be questioned more intensively about the corporate purpose and the purpose of the respective transactions. In addition, business relationships with these customers can only be established with the approval of the management board. The introduction of an EU-wide minimum information standard in dealing with high-risk countries helps to curb the risk of abuse resulting from inconsistent information requirements.
5. Simpler monitoring through Financial Intelligence Units (FIUs)
The rights and competences of national FIUs will be extended and the cooperation and exchange of information among FIUs and other relevant institutions further facilitated. In order to enable the identification of all national bank accounts of a person, central national registers for payment accounts of customers shall be installed. In Germany, this requirement ought be met by the account screening procedure in Sect. 24 c KWG. However, in order to meet the new requirement, cross-border access to the above mentioned data must be granted to investigative authorities of EU Member States.
By including the crypto-currency market in the scope of 5AMLD, lawmakers are taking an important step towards regulating the risks posed by the digitization of the financial sector. Whether the measures will be effective remains to be seen. This also applies to the increased due diligence requirements in connection with high-risk countries. Although the simplified possibility to inspect the transparency register is suitable for counteracting the anonymity of the financial system and thus the framework conditions for money laundering, it is unlikely that this will actually achieve less money laundering. The authorities responsible for the prosecution of money laundering were already able to inspect the registers before 5AMLD. Moreover, the stricter documentation requirements as well as the introduction of central national registers for payment accounts of customers and the data transfer by the FIUs lead to data protection areas of tension, which in future pose challenges for companies with regard to compliance with the General Data Protection Regulation.
We will be glad to advise you regarding all issues in connection with the new Anti-Money Laundering Directive, including data protection aspects.
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