December 27, 2019

EU 5th AML Directive: Ready or Not?

The 5th Anti-Money Laundering Directive (EU) 2018/843, amending the 4th Anti-Money Laundering Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, was published in the Official Journal of the European Union on 19 June 2018 and entered into force on 9 July 2018. The EU Member States must transpose this Directive by 10 January 2020.

The AMLD 5 was prepared in the context of the implementation of the Action Plan for strengthening the fight against terrorist financing adopted in February 2016, following the Paris and Brussels attacks, and the Panama Papers revelations of April 2016. The AMLD 5 introduces substantial improvements to better equip the EU to prevent the financial system from being used for money laundering and for funding terrorist activities.

Amongst other things, the AMLD 5 aims to:

  • enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements
  • enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks
  • limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards
  • broaden the criteria for the assessment of high-risk third countries and improves the safeguards for financial transactions to and from such countries
  • set up central bank account registries or retrieval systems in all Member States
  • improve the cooperation and exchange of information between anti-money laundering supervisors between them and between them and prudential supervisors and the European Central Bank

Importantly, as regards the evolution of the economic and financial environment of the EU, in accordance with Recital (4) of the AMLD 5:

“While there have been significant improvements in the adoption and implementation of Financial Action Task Force (FATF) standards and the endorsement of the work of the Organisation for Economic Cooperation and Development on transparency by Member States in recent years, the need to further increase the overall transparency of the economic and financial environment of the Union is clear. […]”

The exchange of information and the provision of assistance between competent authorities of the Members States is essential for the purposes of this Directive, however the extent of due assessment, implementation, compliance and transparency by Member States remains to be seen. Of course, public and private organisations as well as competent authorities must cooperate toward successful adoption of the AMLD 5.

Needless to say however that personal privacy of individuals must also be respected in accordance with the EU General Data Protection Regulation, applicable national legislation, regulations and guidelines of the Cyprus Commissioner for Personal Data Protection. It is therefore noteworthy, with regard to data protection and privacy, in accordance with Recital (21) of the AMLD 5:

“In order to respect privacy and protect personal data, the minimum data necessary for the carrying out of AML/CFT investigations should be held in centralised automated mechanisms for bank and payment accounts, such as registers or data retrieval systems. It should be possible for Member States to determine which data it is useful and proportionate to gather, taking into account the systems and legal traditions in place to enable the meaningful identification of the beneficial owners”.

The relevant Cyprus competent authority(ies) would therefore need to set up and maintain a central register of beneficial owners of corporate and other legal entities, although it is still not yet clear how or when this mechanism will be adopted. This exercise further establishes Cyprus as a reliable, compliant business jurisdiction.

As a member of the European Union since 2004 and the Eurozone in 2008, Cyprus enhanced its role as robust and reliable destination for key players in various industries and sectors. Cyprus is rapidly growing and enhancing its reputation as a reliable financial and capital management centre. Major conglomerates have established their headquarters and expanded their business activities in Cyprus, given its extremely competitive commercial advantages.

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