As the end of 2019 is fast approaching, we are also reaching the important deadline of the 10th of January 2020 for the transposition of the 5th AML Directive (herein after “5AMLD”) into local Law by all Member States, including Cyprus. With the voting into law of this directive there are a number of main changes which we should expect to see:
1. Beneficial Ownership Registries
The introduction of the 5AMLD into local legislation will translate into the creation of beneficial ownership registries. The need for accurate and up-to- date information on the beneficial owner is a key factor in tracing criminals who might otherwise be able to hide behind a corporate structure.
The beneficial interest will include shares, voting rights, ownership interest, bearer shareholdings or control via other means. The available information will include at least the name, the month and year of birth, the country of residence and nationality, and the nature and extent of the beneficial interest held.
The information on the beneficial ownership will be accessible to:
· Competent authorities and financial intelligence units, without any restriction
· Obliged entities, within the framework of customer due diligence
· Any member of the general public
In relation to trusts and other similar types of legal arrangements the available information will include the identity of the trustee(s), protector(s), beneficiaries or class of beneficiaries, and any other natural person exercising effective control of the trust. This information should be held in a central beneficial ownership register set up by the Member State where the trustee of the trust or person holding an equivalent position in a similar legal arrangement is established or resides. If such a place is outside the Union, the information should be held in tn the Member State where that person enters into a business relationship or acquires real estate in the name of the trust or similar arrangement. The information will be accessible to:
· Competent authorities and financial intelligence units, without any restriction
· Obliged entities, within the framework of customer due diligence
· Any natural or legal person that can demonstrate a legitimate interest
· Any natural or legal person that files a written request in relation to a trust or similar legal arrangement which holds or owns a controlling interest in any corporate or other legal entity through direct or indirect ownership, including bearer shareholdings or control via other means
Member States should set up beneficial ownership registers for corporate and other legal entities by 10 January 2020 and for trusts and similar legal arrangements by 10 March 2020. Central registers should be interconnected via the European Central Platform by 10 March 2021.
2. Virtual currencies and pre-paid cards
The 5AMLD addresses for the first time the risks arising by virtual currrencies and pre-paid cards being used for money laundering and terrorist financing activities, by broadening its scope and including virtual currency exchange platforms (i.e. providers in exchange services between virtual currencies and fiat currencies) and custodian wallet providers as obliged entities. Further, definitions of both virtual currencies and custodian wallet providers have been now included in Article 3 of the 5AMLD.
3. Enhanced due diligence procedures for High Risk Third Countries and PEPs
The 5AMLD will be adding new standards for the assessment of high risk third countries, which will entail the use of enhanced due diligence procedures.
Additionally, the 5AMDL requires each Member State to issue and keep up to date a list indicating the exact functions which, according to national laws, regulations and administrative provisions, qualify as prominent public functions.
4. Centralized bank account registers
Under the provisions of the 5AMLD Member States will set up centralized automated mechanisms, such as central registries or central electronic date retrieval systems, which allow the identification of any natural or legal person holding or controlling payment accounts and bank accounts identified by IBAN and safe deposit boxes held by a credit institution within their territory.
Member States should set up centralised automated mechanisms allowing the identification of holders of bank and payment accounts and safe-deposit boxes by 10 September 2020.
5. The end of anonymity of accounts
In addition to the prohibition which already existed as part of the 4th AML Directive on accounts and passbooks, the 5AMLD also introduces a prohibition on the keeping of anonymous safe-deposit boxes. The owners and beneficiaries of such existing anonymous accounts will be subject to customer due diligence procedures before they can be used in any way.
In regards to anonymous prepaid cards issued in third countries, these will only be accepted by Member States if the third countries’ requirements are equivalent to those applicable for Member States.
6. Obliged entities
Other than the virtual currency exchange platforms and the custodian wallet providers mentioned above, the 5AMLD will specifically also apply to :
· Persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of transactions amounts to €10.000 or more
· Persons storing or acting as intermediaries in the trade of works of art when this is carried out by free port, where the value of the transaction or a series of linked transactions amounts to €10.000 or more
· Estate agents including when acting as intermediaries in the letting of immovable property, but only in relation to transactions for which the monthly rent amounts to €10.000 or more