On July 5th 2016, the European Commission published a proposal to amend the Fourth Anti-Money Laundering Directive (AMLD4). Slightly more than one year later, the regulation marks its implementation date. As of June 26th 2017, all obliged entities will have to comply with the new framework.
AMLD4 aims to mitigate the heightened risk of money laundering and terrorism financing activities. The Directive received a substantial amount of support for implementation after multiple financial institutions showed system malfunctions and ineffective crime security controls.
The directive’s considerations vary from its predecessor in terms of scope expansion and traceability. The proposed adjustments relate to enhanced Customer Due Diligence (CDD), Beneficial Ownership and public disclosure.
Customer Due Diligence
Customer Due Diligence (CDD) is a critical element for effectively managing risks and protecting systems against potential financial crimes and nefarious activities. Financial institutions and organisations will be required to become more data driven and create risk-based internal models. They will be required to improve the current risk assessment tools for assessing and monitoring economic activities of its local customers and global branches.
Beneficial Ownership
One of the biggest improvements in AMLD4 is the approach to the Ultimate Beneficial Ownership (UBO). The objective is to require financial corporations and legal entities to accurately gather and maintain beneficial ownership data, while also sharing this data with appropriate government agencies.
Public disclosure of information
Lastly, the Directive requires national authorities and financial firms to allow public access to beneficial ownership information. This information should be coordinated and aligned and it should comply with the stated requirements of the framework. For example: information about tax criminals that are also UBOs should be disclosed to relevant authorities and third parties in order to prevent abuses in offshore banking.
In conclusion, AMLD4 aims to strengthen security, openness and risk assessment between financial institutions and entities. The regulatory framework is expected to consolidate the AMLCTF internal units and to improve the scope of the current Customer Due Diligence and transaction monitoring analysis.