CATF Reports Jul. 21, 2016, 8:52am


The EU Commission adopted its proposed amendments to its Fourth Anti-Money Laundering Directive (AMLD4) in response to areas of financial weaknesses discovered in the Panama Papers and in light of the recent terrorist attacks on European soil. The main objectives for the amendments, adopted on July 5th, 2016 are twofold: to update and enhance the EU’s counter-terror financing (CTF) and anti-money laundering (AML) laws. The deadline to implement this directive is June 26th 2017, with the possibility of bringing forward terror financing directives by the year end.

A noteworthy feature of the Commission’s proposal includes tackling terror financing risks associated with virtual currencies by bringing virtual currency exchange platforms and custodian wallet providers under the scope of the AMLD 4, a previously lightly regulated arena. This paves the way for increased regulation of digital currency activities in the EU, such as bitcoin altcoins, requiring them to perform customer due diligence for all relationships. These controls restrict the anonymous use of virtual currencies by requiring verification for customers’ identity and monitoring financial transactions to prevent terrorists and money launderers from concealing their illicit financial activities. This is the first time the EU provides a legal definition for ‘virtual currencies’ to be included in legislation for all Member States.

The directive also aims to create a transparent space to better address terror financing in three additional ways. First, through enhancing the powers of Financial Intelligence Units (FIU’s), which are public authorities that analyze and monitor suspicious financial activities within the member states, the directive seeks to align their rules with international standards and provide them greater access to information that addresses privacy and data protection concerns. Second, it applies enhanced checks or due diligence measures to high risk third countries, that is countries considered to have structural deficiencies on AML and CTF activities. Effective July 14, 2016, the Commission would be given authority to identify high risk third countries and enhance its vigilance. Thirdly, it lowers the requirement for identification on prepaid cards to €150 and restricts anonymous use of them online. Finally, it targets AML by increasing the transparency requirements of beneficial ownership of companies, trusts, and other corporate vehicles. Although small, these amendments are a welcome step in the right direction for unifying EU financial intelligence and creating greater measures of transparency and monitoring in the EU financial system.

From the European Commission’s Press Release:

“The Fourth Anti-Money Laundering Directive was adopted on 20 May 2015.The European Commission, in its Action Plan against terrorist financing, called on Member States to bring forward the date for effective transposition of the Directive by the end of 2016.

The amendments put forward today to address both terrorist financing and transparency issues, are   targeted and proportionate to bring some urgent changes to the existing framework. The Commission encourages Member States to take into account the targeted amendments proposed today in the transposition of the Fourth Anti-Money Laundering Directive.

As announced in the Action Plan for strengthening the fight against terrorist financing, the Commission is proposing changes to prevent the financial system from being used for funding terrorist activities…”

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