European Commission releases Fourth Anti-Money Laundering Directive

On 5 February 2013, the European Commission adopted a package of proposals to enhance EU rules on AML. The package comprises a fourth anti-money laundering (AML) directive that would reinforce the vigilance required from lawyers under EU law.

Special attention is paid by the Commission to rules applying to lawyers. Internal Market and Services Commissioner Michel Barnier specifically stated that the new rules aim at proposing “clear rules that reinforce the vigilance by the lawyers.”

The package consists of:

• A proposal for a directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (the Fourth AML Directive); and

• A proposal for a regulation of the European Parliament and of the Council on information accompanying transfers of funds.

These proposals take into account amendments to the FATF requirements issued in February 2012 as well as the report from the Commission on the application of the third money laundering directive (Directive No 2005/60/EC) published in April 2012.

The first draft text is a proposal for a fourth AML directive: it would repeal the Directives No 2005/60/EC and No 2006/70/EC.

The scope of the activities performed by legal professionals that are subject to the AML directive remains unchanged.

Some new provisions are of particular interest for lawyers.

Article 8 of the draft fourth AML directive requires lawyers to draft and implement risk assessments, internal policies, procedures and controls. The implementation of these new requirements would vary according to the size of the law firm (see Chapter I/Section 2 of the draft fourth AML directive).

Moreover, the Commission aims to “tighten the rules on simplified due diligence.” In particular, Article 13 of the draft fourth AML directive provides that “[b]efore applying simplified customer due diligence measures [lawyers] shall ascertain that the customer relationship or transaction presents a lower degree of risk” (see Chapter II/Section 2 of the draft fourth AML directive).

In addition, the proposed changes set out new measures in order to provide enhanced clarity and accessibility of beneficial ownership information requirements (Chapter III of the draft fourth AML directive).

The proposal widens the scope of the enhanced due diligence measures applicable to politically exposed persons (‘PEPs’) to include domestic PEPs and those within international organisations (Chapter VI/Section 3 of the draft fourth AML directive).

Lastly, the proposal strives to simplify record keeping requirements (Chapter V of the draft fourth AML directive) and seeks to introduce principle-based rules to strengthen domestic enforcement and enhance cross-border cooperation (Chapter VI of the draft fourth AML directive).

The second draft text consists of a new regulation on information on the payer accompanying transfers of funds to “improve traceability of payments and ensure that the EU framework remains fully compliant with international standards.” This regulation does not seem to directly concern lawyers.