Money Laundering – trilogue negotiations dilute Parliament’s strong position

In its April plenary, Parliament will vote on the trilogue[1] result of the AMLD5 (Anti-Money Laundering Directive) negotiations. Council and Parliament concluded their talks during the Strasbourg week just before Christmas. The revision of the current anti-money laundering directive does bring with it important improvements. At the same time, the agreed result differs substantially from the ambitious and progressive text Parliament passed in February 2017.

One of the most controversially debated topic was the creation of and access to beneficial ownership (BO) registers. AMLD4 already foresaw the creation of such registers for companies, but not for other legal arrangements such as trusts and trust like structures. At the same time, the now revised directive only granted access to the registers to persons who could proof a legitimate interest. In its revision of the directive, Parliament called for the creation of  BO registers also for trusts and for full public access to such registers (companies and trusts).

Just as important as the existence of and access to these registers, however, is their content. After all, you want to make sure that the individuals listed in the registers really are the BOs. This is why in its text Parliament lowered the participation threshold that defines BOs from 25 to 10 per cent. This was an improvement, but still not ideal. Many transparency and tax justice NGOs (for example the Tax Justice Network) call for thresholds as low as a single share – a call also upheld by Parliament in its report on the findings of the Panama Papers Inquiry Committee. Next to the lower participation threshold, Parliament could also agree on abolishing the nominee director loophole. This loophole allowed senior managers to be registered as BOs if no BO could be indentified. This provision made it easy to hide the real owners of entities.

Taken together, these improvements introduced by Parliament were considered a big step forward in the fight against money laundering. Unfortunately, none of them made it through the negotiations with the Council. Driven by the economic interests of member states such as the United Kingdom, Malta or Luxembourg, the Council successfully pushed back on these fronts. The participation threshold will be kept at 25 per cent, public access to registers will only exist for the company, but not the trust register and senior managers will still be allowed to be listed in BO registers.

What follows is a succinct list of other imporant topics in the anti-money laundering directive for our group, including the results before and after trilogue.

Topic EP vote outcome Trilogue outcome
Tax crimes as predicate offences for money laundering tax offences considered predicate offences for ML under all circumstances, independently of how heavily they are punished at MS leve AMLD4 position was kept, i.e. tax offences are only counted as a predicate offence for money laundering if they pass a certain sanction threshold
Introduction of centralised asset registers bank account register broadened to include land and real estate as well as financial assets

 

a bank account register was agreed, including safe deposit boxes and an assessment by the COM by 26 June 2020 on the interconnection of these registers. Real estate and other registers were dropped, but MS have to grant FIUs and competent authorities access to existing land and real estate registers. Additionally, by 31 Dec 2020, COM has to produce a report assessing the necessity for land registers, to be accompanied by a legislative proposal if needed.
Money laundering black list more robust framework / requirements for COM when drawing up list of high-risk third countries (need to go beyond FATF and other recommendations & take into account wider list of factors including BO transparency, effective implementation of AML provisions and whistleblower protection) EP position was watered down; references to actual administrative practices, whistleblower protection or political independence of competent authorities were deleted as was the part demanding these be taken into account when negotiation free trade agreements. BO transparency and an effective sanction regime as quality indicators remained in the text.
Sanction regime for breaches of the AMLD sanctions now for any breach of AMLD; for “serious, repeated and systematic breaches” stronger sanctions including withdrawal of business licence for OEs; requirement to institute policies preventing conflicts of interest in competent authorities (Art 48); COM “audits” of MS authorities (Art 48a) Art. 48a deleted (no COM audits in MS), instead the review clause (Art. 65.1) foresees the COM to produce a report on the implementation of the directive. On sanctions (Art. 59) the wording of AMLD4 was kept, i.e. only for serious, repeated and systematic breaches sanctions will be applied.

 

A succinct briefing on the AMLD negotiations can be downloaded here.

 

[1]Trilogue negotiations are interinstituional negotiations between Council and Parliament, with the Commission acting as a mediator.