According to the Draft Statement of the Council’s next meeting, on 20th April 2015, the Council of European Union is to adopt  the text of the 4th EU AML Directive  and Regulation on Transfer of Funds at first reading. This means that we will be able to see both documents to be finally adopted by the European Parliament within the next three months as per the EU ordinary legislative procedure.

As per the Draft’s words, the Council’s Position at first reading not only reflects the compromise reached in negotiations between the Council and the European Parliament, with the support of the Commission, but it also represents a balanced package to the fight against money laundering and terrorist financing in the Union.

Aiming to strengthen the EU’s defences against money laundering and terrorism financing, the EU Council has expanded AML/CTF rules in the draft of the 4th Directive. A summary of main amendments follows:

• For gambling services posing higher risks, the Directive requires service providers to conduct due diligence for transactions of € 2000 or more. With the exception of casinos, Member States will be allowed to exempt gambling services from some or all requirements, in strictly limited and justified circumstances. Such exemptions will be subject to an appropriate risk assessment.

• Furthermore, in certain proven low-risk circumstances and under strict mitigating conditions, Member States are allowed to exempt electronic money products from certain customer due diligence measures.

• The Directive applies a risk-based approach to better target risks. The importance of a supranational approach to risk assessment has been recognised at international level. As the Commission is well placed to review specific cross-border threats, it has been entrusted with the responsibility of coordinating the assessment of money laundering and terrorist financing risks affecting the internal market and relating to cross-border activities.

• With regard to the treatment of politically exposed persons, the Directive does not distinguish between persons who hold or have held prominent functions domestically and those who hold or have held such functions abroad.

• As a result of the Directive, beneficial ownership information on corporate and other legal entities will have to be held in a central register in each Member State. Member States that so wish may use a public register. Beneficial ownership information will be accessible to competent authorities and financial intelligence units and, in the framework of the conduct of customer due diligence, to obliged entities. The Directive also enables persons or organisations that can demonstrate a legitimate interest to access at least the following information on the beneficial owner: its name, month and year of birth, nationality and country of residence, as well as the nature and extent of the beneficial interest held. As for trusts, central registration of beneficial ownership information will be used when the trust generates tax consequences.

• As concerns sanctions, the text provides for maximum administrative pecuniary sanctions of at least twice the amount of the benefit derived from the breach, where that benefit can be determined, or at least €1 million. For breaches involving credit or financial institutions, it provides for: a maximum pecuniary sanction of at least €5 million or 10% of the total annual turnover in the case of a legal person; a maximum pecuniary sanction of at least €5 million in the case of a natural person. The provisions relating to sanctions of the Regulation have been aligned to those of the Directive.

• In order to protect the proper functioning of the EU financial system and of the internal market from money laundering and terrorist financing, the Commission will identify, by means of delegated acts, third country jurisdictions which have strategic deficiencies in their national regimes in the field of anti-money laundering and countering the financing of terrorism.