EU Agrees on Stricter Anti-Money Laundering Rules

Francesco Fulcoli - Chief Compliance Officer

The Council of the European Union and the European Parliament have reached a provisional agreement on reforms to strengthen the EU's anti-money laundering and counter-terrorism financing framework. The new rules aim to close regulatory loopholes and ensure illicit money from criminal activities and terrorism cannot be laundered through Europe's financial system.

• Key Elements of the Agreement

The agreement expands the scope of entities subject to anti-money laundering and know-your-customer obligations. Crypto asset service providers will now be regulated, requiring them to conduct due diligence on customers and report suspicious transactions over €1,000. Entities in high-value sectors like luxury goods, professional football, art and real estate will also face new rules.

Maximum limits of €10,000 are set for cash payments across the EU, though countries can impose lower limits. Entities must identify customers for occasional cash transactions between €3,000-€10,000.

Beneficial ownership transparency is strengthened. A beneficial owner is defined as someone who owns or controls over 25% of a legal entity like a company. Obliged entities must understand complex ownership structures. Foreign entities owning EU real estate will have to register beneficial owners back to 2014.

Financial intelligence units will gain broader access to tax, property, vehicle and other government registers to analyze suspicious activity reports. Supervisors will oversee compliant sectors using risk-based supervision. Financial institutions face enhanced due diligence for business ties to high-risk nations and corrupted elites.

Comprehensive money laundering risk assessments will be conducted at the EU and national levels. Findings will guide future policy measures. The agreement also upgrades cooperation between intelligence units on cross-border cases.

• Key Sectoral Reforms

In the cryptocurrency sector, all crypto asset service providers like exchanges will have to implement customer due diligence, verify identities, and report suspicious transactions. Risks from self-hosted crypto wallets will also face mitigation requirements.
Luxury industries like metals/gems, art/collectibles, yachts/planes will be brought under the rules for the first time. Football clubs and agents are recognized as potentially high-risk but countries can exempt low-risk operations after a 5-year phase-in.

• Regulation and Next Steps

The agreement finalizes rules under a new EU anti-money laundering regulation, while the directive reforms member state supervisory systems. If approved, the texts would represent the world's most advanced standards according to officials.

Finishing touches are being made before texts are submitted to EU national representatives and the European Parliament for endorsement. Widespread implementation could then begin within a few years, delivering a major upgrade to Europe's defenses against dirty money flows. Strict supervision and coordination are now seen as essential to protect citizens and financial integrity.