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27th October 2016

4MLD Terminology: “Obliged Entities”

Under 4MLD all those individuals or businesses that are covered by the Directive are referred to as “Obliged Entities”. Thus, this looks set to replace the previously used term of “Designated Entities”.

4MLD Obliged Entities: - those Entities covered by the directive (4MLD):

According to HM Treasury’s recent 4MLD Consultation, the requirements of the directive will apply to the following “obliged entities”:

credit institutions
financial institutions (which includes money service businesses)
the following natural or legal persons when carrying out their professional activities:
auditors, external accountants and tax advisors
notaries and other independent legal professionals that act on behalf of and for their client in any financial or real estate transaction, or by assisting in the planning or carrying out of transactions for their client concerning the:

o buying and selling of real property or business entities

o managing of client money, securities or other assets

o opening or management of bank, savings or securities accounts

o organisation of contributions necessary for the creation, operation or management of companies

o creation, operation or management of trusts, companies, foundations, or similar structures

trust or company service providers
estate agents
other persons trading in goods through payments that are made or received in cash amounting to EUR 10,000 (HMT approximates this as being £8,361 based on standard conversion rates at the time of consultation) or more - whether the transaction is carried out in a single operation or several operations that appear to be linked
providers of gambling services

What has changed in the entities covered by 4MLD compared to 3MLD?

It should be noted that one important change in the list of entities that will be covered by 4MLD applies to those persons trading goods using cash.

Under 4MLD the threshold for eligible transactions in cash (or a number of transactions that appear linked) will come down from €15,000 to €10,000. HMT approximates this as the equivalent of £12,544 down to £8,361. In addition the directive is extended to capture both receiving and making payments in cash.

Additional Terminology:

“Senior Management” is a new definition to introduced under 4MLD as being an officer/employee with specific knowledge of the firm’s exposure to AML/CTF risk and sufficient seniority to make decisions affecting its risk exposure.

Thus, this definition is not restricted to members of the Board of Directors.

4MLD Compliance Support:

Financial crime and AML remain high on the regulatory agenda and will continue to be so. It is thus incredibly important to ensure your firm puts in place the right policies and procedures to ensure compliance with 4MLD requirements.

For an overview of the main changes the Fourth Money Laundering Directive will bring, read our Summary of 4MLD on site.

All firms should now ensure they understand the changes 4MLD will bring and review how they will be affected. If you would like any support or assistance in preparing for the new requirements, please get in touch with our experienced regulatory consultants.