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The 4th ML Directive: Effective 26th June 2017

10th September 2015

After two years of debate, the Fourth Anti-Money Laundering Directive (4th ML Directive) has been finally cleared by the EU as a measure to strengthen the legal framework for Anti-Money Laundering (AML) within the EU. Now, member states must integrate the 4th ML Directive into national laws by 26th June 2017.

At that time, all regulated firms must comply with the directive’s requirements that aim to enhance the protection of the integrity, stability and reputation of the financial services sector from streams of illicit money related to money laundering, organised crime and terrorist financing.

Who will the 4th AML Directive apply to?

The new Money Laundering Directive will apply to an array of businesses, from banks and other financial institutions as well as accountants and auditors. In addition the rules will also have to be complied with by other businesses that are involved in making or receiving cash payments for goods worth at least €10,000, whether or not payment for them is made in a single, or in a number of linked transactions.

Overview of the Directive Requirements:

The 4th ML Directive confirms the Customer Due Diligence(CDD) / ‘Know-your-Customer’ (KYC) requirements and introduces certain improvements to enhance ownership transparency and deal with issues that shell companies pose in order to comply with international standards and best practices.

• Central Register: Each member stats will be required to put into place a central register with data collected by legal entities subject to the AML legislation and related to beneficial ownership data of companies and other entities, such as trusts.
• Politically Exposed People (PEPs): The new Directive provides a new approach to PEPs including providing a more specific definition that includes: Members of supreme courts and high judiciary bodies, members of diplomatic corps, heads of states and governments, ministers, parliamentary members and members of legislative bodies and governing bodies of political parties. Furthermore individuals managing or supervising state-owned companies, members of international organisations and their family members are also classified as PEPs.
• Customer Due Diligence (CDD): Relevant entities must conduct CDD on persons trading in goods with regards to transactions of €10,000 or more, whether a single or totalling this over a number of transactions. These measures must also be applied to providers of gambling services when carrying out transactions of at least €2,000 or more - such as upon the collection of winnings or the wagering of a bet – and again whether done in one transaction or amounting to this over multiple transactions.

The new ML Directive also has provisions relating to electronically or magnetically stored money and also sets forth co-operation duties that require entities to fully and promptly co-operate with the authorities first by reporting suspicious operations and then providing relevant information.

The Fourth Money Laundering Directive