RiskFinancial CrimeEurope’s New AML Directive Takes Effect

Europe’s New AML Directive Takes Effect

European companies will be required to disclose who ultimately owns or controls them under the Fourth Anti-Money Laundering [AML] Directive – published earlier this month in the European Union’s (EU) Official Journal – which comes into effect today.

Among its requirements, the directive obliges EU member states to adopt the directive into their own national laws within two years, and all companies subject to the directive have to comply with it by June 26, 2017.

The directive implements the 2012 recommendations from the Financial Action Task Force (FATF), an international body that sets AML standards, but goes further than the FATF requirements. It mandates EU countries to establish registers that record the ‘beneficial owners’ of businesses. In the case of a corporate entity, the directive defines a ‘beneficial owner’ as an individual who ultimately owns or controls it by via a stake of 25%.

Revealing beneficial owners will improve transparency and help to prevent financial crimes, according to advocates and experts. They claim that mandating companies to disclose who ultimately owns them makes money laundering and tax evasion more difficult.

The registers, however, may not be fully public. Under the directive, an EU member state need only provide access to its law enforcement authorities, ‘obligated entities’ such as financial institutions conducting customer due diligence and others, such as journalists, who can show a ‘legitimate interest’ in getting access. Transparency advocates lobbied for full public access to the registers, arguing that it was vital to investigating illicit money flows.

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