Edited by Sergio Silvestri

January 18 marks a turning point in the European Union's fight against money laundering and terrorist financing. The new legislative package, the result of an agreement between the Council and the European Parliament, introduces a set of regulations aimed at strengthening supervision and prevention at the continent-wide level. The primary objective of this agreement is to protect European citizens and the Union's financial system from money laundering and terrorist financing.

According to Vincent van Peteghem, Belgian Finance Minister, the agreement represents a crucial step towards a more effective and coordinated anti-money laundering system at the European level. This improvement will translate into greater organization and collaboration between national systems for combating money laundering and terrorist financing. The primary objective is to ensure that criminals, including fraudsters, organized crime groups, and terrorists, can no longer use the financial system to legitimise the illicit proceeds of their activities.

One of the key features of the new package is the clear distinction between rules applicable to the private sector and those relating to the organization of institutional anti-money laundering and countering the financing of terrorism (AML/CFT) systems at the national level within EU Member States. This separation will allow for greater clarity and consistency in regulations.

Specifically, the provisional agreement focuses on a new anti-money laundering regulation that will comprehensively harmonize rules across the European Union. This is a crucial step because it will close any loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system. At the same time, the directive agreement focuses on improving the organization of national anti-money laundering systems.

Overall, this agreement marks an important step forward in the fight against money laundering and terrorist financing in Europe, ensuring greater coherence, cooperation and effectiveness within the EU financial system.

In this article, we analyze the new rules in detail, detailing each aspect of them. These aspects highlight the importance of training those required to comply as a fundamental weapon in the fight against money laundering.

1. Regulatory Uniformity across the EU: The package includes a regulation aimed at harmonizing anti-money laundering regulations in the EU, ensuring legislative consistency among Member States. The accompanying directive focuses on the organization of anti-money laundering systems at the national level.
2. Central Role of Obliged Entities in the AML/CTF Framework: In the fight against money laundering and terrorist financing (AML/CTF), obliged entities—which include financial institutions, banks, real estate agencies, asset management services, casinos, and retailers—play a crucial role. Thanks to their strategic position, these entities are on the front lines in detecting suspicious activity, acting as true gatekeepers of the financial system.

• Extension of the List of Obliged Parties: The interim agreement expanded the list of obliged entities to include new categories of entities. Specifically, the regulations will extend to cover a large portion of the crypto-asset sector, requiring all crypto-asset service providers to conduct thorough background checks on their customers. This means they will be required to thoroughly verify their customer information and report any suspicious activity.
• Specific Measure for Crypto-Activities and Additional Sectors: Under the agreement, crypto-asset service providers will be required to implement due diligence measures for transactions worth €1.000 or more. Specific measures are also added to mitigate the risks associated with transactions with self-hosted wallets.

The customer due diligence requirement also extends to other sectors, including dealers in luxury goods such as precious stones and metals, jewelers, watchmakers, and goldsmiths. Furthermore, dealers in luxury cars, aircraft, yachts, and cultural goods, such as works of art, are now among the required entities.

• Inclusion of the Football Sector and Flexibility of Member States: The football sector, recognized as high-risk, now includes professional football clubs and agents in the list of obliged entities. However, given the variability of risks associated with this sector, Member States will have the discretion to exclude such entities from the list if they are deemed low-risk. The rules for professional football will enter into force after a longer transition period, five years from implementation, compared to the three years required for other obliged entities.

3. Implementation of Enhanced Verification Measures: The Council and the European Parliament have also implemented enhanced due diligence measures, focusing in particular on cross-border correspondent relationships in the crypto-asset services sector. These measures aim to enhance oversight and security in international transactions, especially those involving digital assets.

• Application of Stringent Protocols for Financial and Credit Institutions: At the same time, it was established that credit and financial institutions must adopt more rigorous verification procedures when conducting business with high-net-worth individuals. This provision is intended to ensure more careful and detailed management of large volumes of financial assets, increasing transparency and reducing the risk of illicit transactions.
• Consequences of Non-Compliance: Furthermore, it is emphasized that failure by credit and financial institutions to adopt such due diligence measures will be considered an aggravating factor within the sanctions system. This approach strengthens the EU's commitment to combating money laundering and terrorist financing by imposing higher standards of supervision and accountability in the financial sector.

4. New Limits for Cash Payments in the EU: A €10.000 cap on cash payments has been established across the European Union, a measure designed to make money laundering more difficult for criminal organizations. This uniform EU-wide limit aims to limit the opportunities for large amounts of cash to be used for illicit purposes.

• Flexibility for Member States to Impose Stricter Limits: EU Member States will have the option to adopt even stricter restrictions if they deem it necessary. This flexibility allows each country to adapt the maximum cash payment limit to its specific needs and domestic market conditions, providing an additional tool in the fight against money laundering.
• Identification Requirements for Significant Cash Transactions: Furthermore, the agreement currently being finalized requires obliged entities, such as banks and other financial institutions, to identify and verify the identity of individuals involved in any occasional cash transactions between €3.000 and €10.000. This obligation represents a significant step towards greater transparency in financial transactions and a deterrent to the use of cash for illicit purposes.

5. Harmonization and Transparency in Beneficial Ownership: The agreement reached has led to greater harmonization and transparency in the rules governing beneficial ownership. This concept applies to individuals who exercise real control over or benefit from a legal entity, such as a corporation, foundation, or trust, even if the title or property is formally registered under a different name.

• Components of Beneficial Ownership: Ownership and Control: The agreement clearly establishes that determining beneficial ownership requires consideration of two key aspects: ownership and control. Both of these elements must be thoroughly examined to identify all beneficial owners of a legal entity. This also includes non-EU entities that conduct business or own real estate within the EU. Furthermore, the agreement sets the beneficial ownership threshold at 25%.
• Standards for Complex Structures and Data Protection Specific rules are also introduced for multi-level ownership and control structures, aimed at preventing individuals from hiding behind complex chains of corporate ownership. These regulations are complemented by detailed provisions on data protection and retention, aimed at facilitating and expediting the work of the competent authorities.
• Retroactive Registration for Foreign Persons Finally, the agreement requires all foreigners owning real estate in the EU to register beneficial ownership, with retroactive application to 1 January 2014. This measure aims to ensure greater transparency and control over the flow of real estate within the Union, representing a significant step towards greater integrity and security in the European real estate market.

6. Focus on Verification Measures for Operations with High-Risk Countries: Under AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) regulations, obliged entities will be required to implement more stringent verification measures for occasional transactions and business relationships with third countries classified as high-risk. These countries are identified as such due to deficiencies in their national anti-money laundering and counter-terrorism financing regimes, posing a potential risk to the integrity of the European Union's internal market.

• Risk Assessment and Monitoring by the European Commission: The European Commission will undertake the risk assessment associated with these third countries, based on the lists provided by the Financial Action Task Force (FATF), the international body that sets standards in anti-money laundering. The presence of a high level of risk in these countries will justify the introduction of specific countermeasures by the EU or at the national level, both for obliged entities and Member States.

These provisions emphasize the EU's commitment to strengthening internal financial security by preventing and mitigating risks associated with transactions involving countries with less effective anti-money laundering and counter-terrorism systems.

 ANTI-MONEY LAUNDERING DIRECTIVE

7. Verification and Reporting in the Registers of Beneficial Owners: The interim agreement establishes that all information provided to the central beneficial ownership register must undergo a thorough verification process. It is essential that individuals or institutions associated with individuals or entities subject to specific financial sanctions be duly reported in this register. This step ensures greater control and transparency in financial transactions.

• Inspection Powers and Access to Records: The bodies responsible for managing beneficial ownership registers will be empowered to conduct inspections of registered legal entities' premises, especially in situations where there are doubts about the accuracy of the information provided. This provision strengthens the ability to monitor and ensure the accuracy of the registered data.

Furthermore, the agreement provides that not only supervisory authorities and public administrations, but also members of the public with a legitimate interest, including representatives of the press and civil society, can have access to the records. This approach aims to increase transparency and public accountability.

• Facilitating Property Investigations: To facilitate investigations into potential criminal schemes involving real estate, the agreement ensures that real estate records are easily accessible to the relevant authorities. A single access point will be available to view detailed information such as price, property type, historical data, and any charges or restrictions related to the property, such as mortgages and liens. This unified system is designed to simplify and expedite investigations into potential illicit activity related to the real estate market.

8. Strengthening Financial Intelligence Units (FIUs) with Expanded Access to Crucial Information: Under the agreement, FIUs will have immediate and unrestricted access to a wide range of financial, administrative, and investigative information. This includes tax details, data on funds and other assets frozen due to targeted financial sanctions, information on transfers of funds and crypto-assets, as well as access to national registers of vehicles, aircraft, and recreational craft, customs data, and weapons registers. This expanded access is designed to further strengthen the FIUs' investigative and analytical capabilities.

• Communication and Cooperation in Investigations: FIUs maintain constant communication with the authorities responsible for combating money laundering and terrorist financing, including investigative, prosecutorial, and judicial bodies. Particular attention is paid to cross-border cases, where FIUs will collaborate closely with counterparts in other Member States involved. The FIU.net system will be enhanced to facilitate the rapid sharing of reports that cross national borders.
• Consideration of Fundamental Rights and Decision-Making Power: The agreement reaffirms the importance of fundamental rights in the work of FIUs, ensuring that these are always taken into account in their decisions. It also establishes a robust framework that allows FIUs to suspend or deny consent to suspicious transactions, providing them with the necessary time to analyze data, assess suspicions, and communicate their findings to the competent authorities so that appropriate action can be taken. This framework significantly strengthens the role of FIUs as guardians of money laundering and terrorist financing.

9. Role and Responsibilities of Supervisors towards Obliged Parties: The agreement requires each European Union Member State to ensure adequate and effective supervision of all obliged entities present within its territory. This supervision will be carried out by one or more supervisory bodies, which will adopt an assessment and intervention method based on the level of risk associated with each obliged entity.

• Reporting Suspicious Activity and Collaboration with FIUs: Supervisors will be responsible for detecting and reporting to the Financial Intelligence Units (FIUs) any suspicious activity that arises during their control activities. This reporting process is essential to ensure that potentially illicit activities are identified and addressed promptly.
• Implementation of New Supervisory Measures for the Non-Financial Sector: Additionally, the agreement introduces new supervisory measures specifically designed for the non-financial sector. These include the establishment of supervisory colleges, which will be responsible for monitoring and evaluating compliance with AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) regulations within this sector.
• Development of Technical Standards by AMLA: The Italian Anti-Money Laundering Authority (AMLA) will be responsible for developing draft regulatory technical standards. These standards will define the general conditions necessary to ensure the effective and compliant functioning of AML/CFT supervisory colleges, thus contributing to a general strengthening of the system for preventing and combating money laundering and terrorist financing at the European level.

10. Importance of Risk Assessments at EU and National Level: The provisional agreement also underscores the fundamental importance of risk assessments, both at the European Union and national levels, as key tools in the fight against money laundering and terrorist financing. These assessments are crucial for identifying and understanding the nature and extent of the risks associated with these illicit activities.

• Role of the European Commission in Risk Assessment: The European Commission will be tasked with conducting a thorough assessment of the risks of money laundering and terrorist financing at EU level. Based on this analysis, the Commission will issue specific recommendations to Member States, guiding them on the best strategies and measures to adopt to effectively mitigate these risks.
• Responsibilities of Member States in National Assessments: In parallel, Member States are required to conduct their own risk assessments at the national level. This process allows for the identification of specific vulnerabilities and threats within each national context. Member States will then be responsible for implementing strategies and policies aimed at effectively reducing the identified risks, ensuring a coordinated and comprehensive Europe-wide response to money laundering and terrorist financing.

11. Importance of Training: Continuous and specialized training for all obliged entities emerges as an indispensable tool. The new regulations require a thorough understanding and informed implementation of the rules. Qualified training, such as that offered by the Italian Anti-Money Laundering School and the European School of Banking Management, is therefore essential to ensure that the entities involved are equipped to effectively address the challenges of money laundering and terrorist financing.

Next Steps for the Implementation of the Legislative Package: Following the provisional agreement, the legislative documents are being finalized and will be submitted for approval to the member states' representatives in the Permanent Representatives Committee, as well as to the European Parliament. Once approved, formal adoption by the Council and the European Parliament will be required. The texts will then be published in the Official Journal of the European Union and will then officially enter into force.

Conclusion: The EU's new anti-money laundering legislative package marks a substantial step forward toward greater protection of European financial integrity. Its effectiveness will be significantly influenced by how thoroughly the regulations are understood and implemented by those required to do so. This is where the essential role of training emerges: it becomes the primary vehicle for disseminating the necessary knowledge and enhancing skills. Only through a coordinated effort and targeted, in-depth training will it be possible to effectively combat money laundering, strengthening the security and stability of the entire European financial system.