The European Union (EU) has recently made a significant stride in fortifying its defenses against money laundering and terrorist financing. A provisional agreement reached between the EU Council and Parliament introduces a comprehensive anti-money laundering (AML) package aimed at protecting EU citizens and the financial ecosystem.
Fenergo, a RegTech platform that helps firms comply with KYC, AML and other regulatory obligations, has delved into the EU’s AML package.
The proposed AML package promises to instigate sweeping changes across various sectors, marking a pivotal shift in regulatory standards. Key among these changes is the expansion of the crypto sector’s regulatory perimeter. Crypto-asset service providers (CASPs) are now mandated to adhere to stringent due diligence requirements, including customer verification and the reporting of suspicious activities for transactions exceeding €1,000.
Moreover, the definition of ‘obliged entities’ is set to broaden significantly. It will now encompass businesses within the football industry and traders of luxury items such as cars, airplanes, yachts, precious metals, stones, and artworks. This expansion reflects the EU’s intent to seal potential loopholes in high-value transactions that could otherwise be exploited for illicit activities.
In a bid to align the crypto sector with traditional financial standards, the package introduces enhanced due diligence measures for cross-border relationships within the crypto realm. Similarly, credit and financial institutions face stricter scrutiny, especially when dealing with high-net-worth individuals engaged in significant asset transactions.
An important preventive measure is the establishment of an EU-wide cash payment limit of €10,000. This initiative aims to hinder the movement of laundered money, with obliged entities being required to identify individuals involved in cash transactions ranging from €3,000 to €10,000.
The package also brings about a paradigm shift in the transparency of beneficial ownership. The threshold for beneficial ownership is harmonized at 25%, coupled with stringent rules to dismantle multi-layered ownership structures that obscure true ownership. Central beneficial ownership registers will now hold verified information, accessible to the public, the press, and civil society, fortifying the transparency and accountability of entities, especially those linked to sanctioned individuals.
High-risk third countries are another focal point, with obliged entities mandated to apply enhanced due diligence for transactions involving these regions, guided by assessments from the Financial Action Task Force (FATF). The role of Financial Intelligence Units (FIUs) is also reinforced, ensuring prompt access to various information sources and fostering cross-border cooperation while safeguarding fundamental rights.
To ensure adherence, the package mandates effective supervision of obliged entities in each member state, with supervisors responsible for reporting suspicions to FIUs. Additionally, risk assessments at both EU and national levels remain pivotal in identifying and mitigating potential threats.
This provisional agreement symbolizes a concerted effort by the EU to eradicate AML vulnerabilities. By extending the scope of obliged entities, especially in the crypto and luxury goods sectors, and enforcing rigorous due diligence measures, the EU aims to establish a robust defense against financial crimes. The agreement not only bolsters the financial integrity of individual member states but also signifies a unified stance against the intricate web of financial crimes threatening the EU’s stability.
At the bottom of this transformative journey lies the power of tools like Fenergo’s Client Lifecycle Management (CLM), offering digital solutions for managing the client lifecycle, ensuring regulatory compliance, and enhancing operational efficiency.
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