The AML Rulebook and the EU Council proposed changes to the AMLR and AMLD6

New developments regarding the proposed Anti-Money Laundering Regulation (“AMLR”) and the sixth Anti-Money Laundering Directive (“AMLD6”) have emerged with the new political agreement reached by the European Union (“EU”) Council (the “Council”) on 7 December 2022.

This now positions the Council to commence negotiations with the European Parliament (EP), for the eventual agreement and adoption of the final version of the legislative texts. Thereafter the acts will form a part of the “AML rulebook”, together with a regulation on information accompanying transfers of funds and certain crypto-assets.

The purpose of the AML rulebook

The purpose of the proposed AML rulebook is to have a single consistent AML/CFT framework across the European Union to ease compliance for subject persons who are subject to AML/CFT rules and supervision, in particular those who operate cross-border activities. With this, there will also be a new supervisory authority (i.e., the European AML Authority ‘AMLA’) which will be established in 2023 and operational by 2024. It is expected that AMLA will have direct supervision powers and the ability to crack down on illicit finance across all EU Member states. Further, like any other supervisory authority, AMLA will be able to impose fines and penalties upon any subject person which fails to comply with the AML rulebook requirements. 

EU Council proposed changes to the AMLR and AMLD6

The main legislative changes proposed by the Council includes the following:

• Extending the application of the AML rulebook to include the cryptocurrency sector. This means that crypto-asset service providers (CASPs) will be compelled to apply due diligence measures on their customers should their transactions amount to €1,000 or above;
• The definition of subject persons will also be expanded to include the following: persons trading in precious metals, precious stones, and cultural goods as well as jewelers, horologists, and goldsmiths where the value of the transaction or linked transactions amounts to at least €10,000;
• The harmonisation and the interpretation of “ownership” and “control” within the context of beneficial ownership. Additional rules have been developed to provide guidance on multi-layered ownership and control structures of corporate and legal entities, including, that of express trusts, foundations and collective investment schemes (“CISs”).
• Rules on the identification of class of beneficiaries have also been further clarified;
• Rules on outsourcing have also been further clarified (including the types of tasks which may/may not be outsourced) particularly in the context of collective investment schemes;
• Further detailed rules surrounding the scope of a subject person’s policies, procedures controls and their compliance function; and
• Where FATF has identified a third country as High-Risk and subject to monitoring, the said country will automatically be replicated into the two corresponding EU lists, i.e. the “blacklist” and “grey list”, provided that certain criteria are satisfied. Thus, the Commission can eliminate having to redo their own assessment and listing processes that has already been performed by the FATF ensuring prompt transcription.

The Council is now ready to begin trialogue negotiations with the EP to agree on a final version of the text. Therefore, the proposed changes mentioned above are not yet final, and may be subject to further changes.

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