A long-awaited directive against money laundering published by the European Commission today includes new mechanisms to ensure that beneficial owners of companies are identifiable.
The commission’s fourth anti-money laundering (AML) directive includes a regulation governing information that accompanies fund transfers. The commission said the proposals aim to provide a more targeted risk-based approach to improve the consistency of rules across the member states.
The proposals suggest ‘a clear mechanism’ for identifying beneficiaries who would previously have been anonymous. They call for improving the transparency of the rules on customer due diligence to allow a deeper knowledge of customers and a better understanding of the nature of their business.
They also propose expanding provisions for dealing with ‘politically exposed persons’ to include those living in EU member states, such as heads of state, members of government, members of parliament and judges.
The proposals also target the entire gambling sector - the third directive covered only casinos - and call for greater co-operation between national financial intelligence units.
Michel Barnier, internal market and services commissioner, said: ‘Our aim is to propose clear rules that reinforce the vigilance by banks, lawyers, accountants and all other professional concerned.’
A Law Society spokesperson said: 'There is an attempt to provide further clarity around the record keeping requirements, to make them more consistent with the requirements under data protection legislation. While the Law Society appreciates these clarifications, they do not provide a solution for situations where law firms are required to obtain due diligence information only for some activities for the client and not for others.
'Another proposal, which may be of greater interest when advising clients, is the new requirement for all companies, legal entities and trustees to hold adequate, accurate and up-to-date information on their beneficial owners. They are also required to make this available to those doing AML/counter-terrorism financing due diligence and to law enforcement.
'It is not yet clear whether some countries will interpret this requirement to provide the information as a need to provide it publicly or merely on a transactional basis.
'The Society has previously cautioned that this approach will be likely to impose significant administrative burdens on legitimate companies, with subsidiaries having to be kept updated on share ownership changes across entire company groups on possibly a daily basis.
'It is not clear how this will make a significant difference to the fight against financial crime taking into account the fairly specific approaches which criminals have been documented as employing when using corporate vehicles as a way of laundering funds.'
The proposals will now be sent to the European Parliament and the Council of Ministers for approval.