The 3rd Anti-Money Laundering Directive had changed the way of understanding the prevention and detection of money laundering within the financial sector; the only downside was that its transposition by the Member States had led to sometimes divergent interpretations.
To remedy this, and also to align with the GAFI recommendations changed in 2012, European legislators have been working on a new version, the Directive 2015/849.
The fourth of its kind, this directive adopted 20 May 2015 by the European Parliament strengthens the regulatory arsenal of the European Union in the fight against money laundering and terrorist financing. It must now be transposed by all Member States by June 2017. In order to present the scope of changes to come and discuss their impact on the financial sector, experts from PwC Luxembourg brought together nearly 70 compliance and legal officials on Monday 29 June.
The risk-based approach, introduced with the 3rd Directive, is enhanced to better identify, understand and mitigate the risks of money laundering and terrorist financing. It is for each professional subject to take appropriate steps to identify and assess the risks they face by taking into account a number of factors and criteria. Depending on the nature and level, higher or lower, of these risks, financial institutions will take appropriate measures, justified and documented.
"These assessments should be documented, maintained and made available to the competent authorities. These measures have already largely anticipated by professionals following the 12-02 CSSF regulation" said Roxane Haas, partner and Anti Money Laundering Leader, PwC Luxembourg. "Regarding the approach based on risk, the 4th Directive is more of an evolution than a revolution and the financial sector had in recent years been launched in compliance projects such emphasizing on training employees, the introduction of new procedures and adapt their information systems."
Greater transparency to strengthen trust
In order to enhance transparency and to be better equipped to go after the criminals, the European legislator has introduced several new products in this 4th Directive. Member States will, for example, set up a central register of beneficial related data and ensure that these data are available to the competent authorities without any restrictions. These data should also be available to entities subject as well as any person or organisation that can demonstrate a legitimate interest. States must find a balance between the provision of data and compliance with the rules for their protection. The notion of beneficial owner is also specified by the Directive: it is concerned any natural person who owns or controls directly or indirectly a legal entity regardless of any ownership interest or any person having a power of decision. Trusts are also concerned. What will be the impact on reporting institutions? They will be required to hold information on their beneficial owners, information that will feed the newly created central repository in each Member State.
The Directive provides for an expansion and a tightening of sanctions for institutions not complying with the new rules and also extends the scope of predicate offenses of money laundering to criminal tax offenses related to direct and indirect taxes. In its circular 15/609 issued on 27 March 2015, the CSSF already attracted the attention of financial institutions under the supervision of the change to come. It reminded the officers and employees of the actors of the importance of ensuring the implementation of internal governance to detect and eliminate the risks associated with non-compliance of their activities of this regulatory framework.
Financial crime: an international challenge
All this is part of a constantly changing international context and increasingly complex.
"The financial sector in Europe is facing multiple challenges. The regulatory environment is very complex and constantly changing, with measures such as the 4th Laundering Directive, CRS, or EU economic sanctions regime. Add to this the laws of some foreign countries with extraterritorial application, such as the sanctions programme of the US Treasury Department or anti-corruption laws. With the widespread use of new technologies, development of new products such as hedge funds, or the Terrorist Finance upsurge in connection with the Islamic State, challenges abound. As revealed by our survey Global Economic Crime Survey, nearly 45% of respondents reported having been victims of economic crime," said Michael Weis, partner and Forensic Services and Financial Crime Leader, PwC Luxembourg.
The Member States now have two years to transpose the directive into national law. Time that also allows financial firms to anticipate future changes.
Photo by Blitz Agency © PricewaterhouseCoopers Société coopérative: Roxane Haas
