Introduction: The fourth EU Anti Money Laundering Directive, (EU) No. 2015/849 (Directive) has entered into force since 26th June 2015. EU Member States had to implement the Directive by 26 June 2017 into national law. Nevertheless, Cyprus was not able to meet the deadline and the government had submitted a proposed bill to the parliament for voting pending review.
The Directive repealed the existing 3rd Anti-Money Laundering Directive (Directive 2005/60/EU) and the corresponding Implementing Directive (Commission Directive 2006/70/EC). When you incorporate a Cyprus company some anti money laundering rules must be observed.Our Firm in its effort to avoid excessive inconvenience to our international clients requests minimum documentation for his Cyprus Company Incorporation.
Key elements of the Fourth EU Anti Money Laundering Directive
- The Fourth EU Anti Money Laundering Directive has a risk based approach focus
Under the new Directive, a key principle is one based on risk analysis. The obliged entities will be required to establish which specific simplified or enhanced measures are to be taken to reduce or prevent the identified risks. It essentially increases responsibility of obliged entities to identify and implement such measures bases on a risk based approach which will need to be justified.
- Wider Scope
The Directive also widens the scope of anti-money laundering legislation requirements by reducing the threshold for cash transactions above which persons trading in goods qualify as ‘obliged entities’ and in particular in which an obligation to identify the customer is triggered. This threshold will be reduced from €15,000 to €10,000. Moreover it also extends its applicability to providers of gambling services which are now listed as ‘obliged entities’, however it is under Member State’s discretion to remove these providers, excepting the casinos – partially or completely from the list of obliged entities if a low money laundering risk is evidenced. Further it includes as obliged entities in addition to real estate agents involved in the purchase or sale of real estate properties, also those agents involved in the letting of real estate properties.
- The Fourth EU Anti Money Laundering Directive demands beneficial ownership information
EU Member States are obliged to create central registers containing information on the beneficial ownership of corporations. As you can appreciate this may be of major impact to the incorporation of companies due to increased transparency. It is believed that a central register will increase considerably the quality of the available data used to identify the contractual party of the beneficial owner meeting at the same time the demand of the FATF for a higher level of transparency with respect to beneficial ownership. Moreover, competent national authorities and obliged entities have to have access to the central register under the anti-money laundering national legislation for exercising their customer due diligence. In addition to the above, entities and natural persons which are able to demonstrate a ‘legitimate interest’ in this information (e.g., an interest relating to money laundering) must get access to the central register except for information regarding trust structures. However, it is up to the Member State to restrict this access to information regarding beneficial owners completely or partially in exceptional cases.
- Politically Exposed Persons (PEPs)
The new directive expands the category of PEPs to include members of the governing bodies of political parties, which will result in the necessity to update existing PEP lists.
The Member States are required to ensure that in the cases of serious, repetitive or systematic failings of the obliged entities to meet certain key requirements of the new Directive that the permissible sanctions include 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 €1m. In the case of banks and financial services providers, the maximum administrative fine amounts to no less than €5m or 10 percent of the total annual turnover according to the latest available accounts approved by the management body. Such breaches may also be published.
With the new directive it is clear that the EU is implementing the stricter requirements of the FATF and increases its efforts to effectively combat money laundering and terrorism financing. It is expected for the new directive to be transposed into national law no later than the end of the year.
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