What will the 4th Money Laundering Directive mean for the legal profession?

The European Commission has released its proposals for the 4th Money Laundering Directive.  Law firms will not only have to have a written anti-money laundering risk assessment, policies and procedures, they will also need a process to test how effective these are.

Enhanced Due Diligence for PEPs will also cover PEPs as beneficial owners, and the requirement to check them will also now include United Kingdom PEPs as well as those outside the member state.

Entities which are regulated for AML compliance have not been included in the list of the types of client that are considered low risk. Simplified Due Diligence provisions are not now contained in the 4th Directive, however counties may permit Simplified Due Diligence, which means that there could be a range of different requirements country by country and across different industries.

There is also a new requirement for all companies to hold up-to-date information on their beneficial owners. As yet, it is not clear whether this information will be held publically or made available on a transactional basis.

Once this is clear, there is going to be continuous change to money laundering legislation and lawyers need to ensure that their firms take a proportionate approach in line with the size and scope of their businesses.

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