Identifying and verifying the identity of individuals with a controlling interest in companies has long been a requirement under global AML standards due to the risks of such corporate structures being open to abuse and facilitating financial crime. However, despite this issue, few countries mandate the collection and disclosure of beneficial ownership information making it easier for offenders to hide their transactions and very difficult for compliance professionals to fulfil regulatory requirements.
The incoming EU Fourth Money Laundering Directive (MLD4) aims to revise and improve existing anti-money laundering and counter-terrorist financing (CTF) legislation. The agreed changes concur with revised recommendations laid out in 2012 by the Financial Action Task Force (FATF), the international AML standards body. These new rules are expected to be formally finalised and enter into force in the next two years.
New central registries
The most significant update to EU AML legislation is that businesses will be required to provide detailed information regarding the beneficial ownership of their company. This information will be stored on central registries in Member States. The UK via a G8 initiative to tackle tax evasion together with other plans from Denmark and the Netherlands have already set the wheels in motion to address such requirements.
This data will be available to regulators and enforcement agencies. Banks and other companies subject to AML rules will be classed as "obliged entities" under the new legislation and will have access to the information for due diligence purposes.
Greater transparency and accountability
Individuals that can demonstrate a "legitimate interest" in accessing the data, specifically investigative journalists, will also be able to request access to the information stored on the registries, in the hope that this will enable greater transparency and accountability in financial transactions.
This measure and other changes proposed in the legislation means that compliance professionals will be reviewing and updating compliance policies and procedures accordingly.
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