The 4th Money Laundering Directive

The 4^th Money Laundering Directive proposal was published earlier this year and will take some time to be implemented in the UK, with the Directive allowing a maximum of two years for implementation. However, the EU press release issued on 5 February 2013 highlights what is coming:

1. The inclusion of an explicit reference to Tax Crimes as a Money Laundering Offence.

2. The requirement for all Regulated Entities to have a written risk assessment of its AML risks and to have written policies and procedures Those policies and procedures will need to include policies and procedures on Employee Screening in addition to the existing requirements.

3. A mechanism to help identify Beneficial Owners. Under the new rules Companies will be required to hold information about their Beneficial Owners and disclose this to appropriate Authorities and to Entities providing them with Regulated Services. Similarly, Trustees will be required to “hold adequate, accurate and current information on Beneficial Ownership regarding the Trust” and disclose it to Entities providing Regulated Services. This information must “include the identity of the Settlor, of the Trustee(s), of the Protector (if relevant), of the Beneficiaries or Class of Beneficiaries, and of any other natural person exercising effective control over the Trust”.

4. A halving of the current €15,000 cash limit for High Value Dealers (HVD) to €7,500. Allowing for currency fluctuations the new safe limit in the UK will represent about £6,000. As before, anyone selling goods for cash in a single or series of linked transactions in excess of the new limit will need to register with HMRC as a HVD. Wherever a Customer pays cash above the limit the HVD will need to carry out the normal risk assessments, Customer Due Diligence (ID) checks and report suspicious activities.

5. An extension of Politically Exposed Persons (PEP) to include domestic as well as foreign people entrusted with prominent public functions i.e., your local MP will become a PEP.

6. The requirement for UK Holding Companies with Overseas Branches or Subsidiaries in Jurisdictions with less rigorous AML Regimes to apply the UK Regime in those places, unless prohibited by that country’s laws. Countries with any such prohibition will quickly come under pressure from EU States to modify their laws. Ultimately, Holding Companies could be requested to cease operating in such countries.

7. The broadening of the scope of the Regulated Sector beyond "Casinos" to cover the Gambling Sector in general.

8. The extension of the Regulated Sector to include “Real Estate Agents, including Letting Agents”. The addition of Letting Agents is new.