On April 20, the European Council of Ministers adopted its version of new rules aimed at preventing money laundering and terrorist financing in the form of a draft new European Union Directive and Regulation (Draft Rules). The Draft Rules, once implemented into EU law, will strengthen EU rules against money laundering and ensure consistency with the approach followed at the international level.

With the European Council of Ministers having adopted its version of the Draft Rules, this will now mean that the European Parliament, with which agreement was reached on December 16, 2014, can adopt the Draft Rules at its forthcoming meeting. Once adopted by both the European Council of Ministers and the European Parliament, all that would then be required is for the European Commission to publish the Draft Rules in their final format and then the Regulation will be binding EU law and EU countries would have to amend their national anti-money laundering rules in line with the new directive.

The Draft Rules reflect the need for the EU to adapt its legislation to take account of the development of technology and other means at the disposal of criminals. The main elements are:

  • extension of the scope of EU anti-money laundering rules, with requirements for providers of gambling services and persons trading in goods at a much lower threshold (EUR €10,000 instead of EUR €15,000) to apply checks to cash payments;
  • application of a risk-based approach, using evidence-based decision making, to better target risks; and
  • tighter rules on customer due diligence.

There are also specific provisions on the development of a central register of the beneficial owners of EU companies. This central register will be accessible to EU regulatory authorities, financial intelligence units and, as part of customer due diligence, obliged entities such as banks. Certain persons who can demonstrate a legitimate interest should also be able to access at least the following stored information:

  • name;
  • month and year of birth;
  • nationality;
  • country of residence; and
  • nature and approximate extent of the beneficial interest held.

For gambling services posing higher risks, the Draft Rules require service providers to conduct due diligence for transactions of EUR €2,000 or more. In proven low-risk circumstances, EU countries can exempt certain gambling services from some or all requirements, in strictly limited and justified conditions. Such exemptions will be subject to a specific risk assessment. Casinos will not be able to benefit from exemptions.

The Draft Rules identify that full traceability of fund transfers can be particularly important in the prevention, detection and investigation of money laundering and terrorist financing. While existing EU legislation already requires payment service providers to accompany transfers of funds with information on the payer, the Draft Rules also require information on the payee to be included. Under the Draft Rules, the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority will be asked to issue guidelines addressed to EU regulators and payment service providers on measures to be taken when they receive transfers of funds with missing or incomplete information on the payer or the payee.

The text of the regulation is available here.

The text of the of the directive is available here.