Annexes to COM(2017)340 - Assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to cross-border activities - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)340 - Assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to ... |
|---|---|
| document | COM(2017)340  |
| date | June 26, 2017 |
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(1) Member States should develop adequate tools to ensure that the identification of the beneficial owner is duly undertaken when applying the CDD measures. In the case of legal entities, where obliged entities have identified only the senior manager as the beneficial owner, this should be highlighted by the obliged entity (e.g. through a specific recording of this information). It would be advisable to keep records of any doubt that the person identified is the beneficial owner. Particular attention should be paid to complex structures where the settlor, trustee, protector, beneficiaries or any other natural person exercising ultimate control over the trust involve one or several legal entities.
(2) The rules of 4AMLD
on transparency of the beneficial ownership information should
also be implemented quickly, with the introduction of beneficial ownership registers for all types of legal entities and legal arrangements. The information in the registers should be verified on a regular basis, for example by a designated authority, so as to avoid discrepancies with information collected by obliged entities as part of their CDD procedures.
(3) Member States
should ensure that the sectors the most exposed to risks from opaque
This
beneficial ownership schemes are effectively monitored and supervised. This is particularly the case for intermediaries such as tax advisors, auditors, external accountants, notaries and other independent legal professionals and for providers of advice to undertakings on mergers/acquisitions39. In the latter case, while these services are covered by the EU AML/CFT framework, the SNRA highlights ineffective application of the rules to this specific category of undertaking.
^ Appropriate resources for supervisors and FIUs
In accordance with 4AMLD, Member States must allocate "adequate" resources to their competent authorities40. However, from the data collected at this stage, it is not possible to pinpoint any systemic correlation between allocated resources and the size of the sector, the number of obliged entities and the level of reporting. Member States should demonstrate that sufficient resources are allocated to supervisors and FIUs so that they can carry out their tasks.
> Increase of
on-site inspections by supervisors
In the financial sector, supervisors need to put in place a risk-based supervision model according to the ESAs joint guidelines on risk-based supervision published in November 201641. These guidelines state that supervisors should review – both periodically and on an ad hoc basis – whether their AML/CFT risk-based supervision model delivers the intended outcome and, in particular, whether the level of supervisory resources remains commensurate with the ML/TF risks identified. In this respect, it is important that supervisors conduct sufficient on-site inspections that are commensurate to the ML/TF risks identified.
Member States should ensure that the scope of these on-site inspections is focused on specific operational AML/CFT risks depending on the specific vulnerabilities inherent to
39 An undertaking other than a credit institution, which carries out activities, listed in point (9) of Annex I to Directive 2013/36/EU.
40 Articles 32 (3) (on FIUs) and Article 48 ( 2) (on supervisory authorities) of 4AMLD.
41 See https://esas-joint-committee.europa.eu/Publications/Guidelines/Joint%20Guidelines%20on%20risk-
a product or a service. This relates in particular to institutional investment (especially through brokers); to private banking where supervisors should assess the implementation of rules on identifying beneficial ownership; and currency exchange offices and money value transfer services ("MVTS") where supervisory inspections should include a review of training received by agents.
In the non-financial sector, Member States should ensure that their competent authorities conduct sufficient unannounced spot checks on high value dealers especially for gold and diamonds sector to identify possible loopholes in the compliance with CDD requirements. Similarly the number of on-site inspections in the sector of professionals carrying out activities covered by the legal privilege principles should be commensurate to the risks.
> Supervisory
authorities to carry out thematic inspections
Supervisors should develop a better understanding of the AML/CFT risks to which a specific segment of the business is exposed to. This recommendation should apply to institutional investment (especially through brokers) and private banking; trust and company service providers (TCSPs); tax advisors, auditors, external accountants, notaries and other independent legal professionals; services providers related to advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings. For those sectors, supervisors should specifically assess the implementation of rules on identifying beneficial ownership. It should also apply to MVTS. In such cases, Member States should ensure that supervisors carry out thematic inspections within 2 years of publication of the SNRA report, unless such inspections have been carried out recently.
>* Considerations for extending the list of obliged
entities
Currently some services/products are not covered by the EU AML/CFT framework. According to Article 4 of 4AMLD, Member States should extend the scope of the AML/CF T regime to professionals particularly at risk. When applying this provision, Member States should consider subjecting at least cr owdf unding, virtual currency exchange platforms and wallet providers , auction houses, art and antiques dealers and specific traders in high-value goods to their AML/CFT regime, as they are identified as risky under the SNRA.
>* An appropriate level of CDD for occasional transactions
Based on the current EU legal framework, some ser vices/products may be exempted from CDD for occasional transactions below a specific threshold (EUR 15 000). However, there are some cases where these threshold - base d exemptions could be considered as unjustified and where a threshold of EUR 15 000 raises concerns. In that context, Member States should define a lower CDD threshold applicable to occasional transactions to ensure that it is commensurate with the AML/CF T risk identified at national level. Member States should report to the Commission their national threshold for occasional transactions. A threshold similar to that for occasional transactions for transfers of funds can be considered commensurate to the risk (i.e. EUR 1 000). In addition, Member States should provide guidance on the definition of occasional transactions, providing for criteria such that the CDD rules applicable to business
relationships are not circumvented for currency exchange offices and, pending the new requirements of 4AMLD, money remittances.
^ Appropriate level of CDD in case of safe custody services and similar services
To monitor safe custody services properly, appropriate safeguards should be put in place. This recommendation should apply to the following sectors:
- safe custody services provided by financial institutions: Member States should ensure that these services are offered only to holders of a bank account in the same obliged entity and should address appropriately risks posed by thi rd - parties access to safe deposit boxes. Guidance should be issued to credit and financial institutions to clarify how they should effectively monitor the content of the safe deposit box as part of their CDD/monitoring requirements; and
- similar storage services provided by non -financi a l providers: Member States should define measures commensurate with the risks posed in providing these services, including in free-ports, depending on the national circumstances.
Regular cooperation between competent authorities and obliged entities
This enhanced cooperation should seek to make detecting suspicious transactions simpler and to increase the number and the quality of the STRs. Supervisory authorities should provide clear guidance on AML/CFT risks, on CDD, on STR requirements and on how to identify the most relevant indicators to detect ML/TF risks. Member States should ensure that appropriate feedback is delivered by FIUs to obliged entities. This recommendation should apply in particular to the following sectors:
- gambling sector: For gaming machines, clearer guidance should be provided by supervisory authorities on the emerging risk linked to video lotteries. For online gambling, competent authorities responsible should also put in place programmes to raise awareness among online gambling operators as to the emerging risks factors that may impact the vulnerability of the sector. These include the use of anonymous e-money or virtual currency and the emergence of unauthorised online gambling operators; further feedback from FIUs on the quality of the STRs, ways to improve the reporting and about the use made of the information provided, and taking into account specificities of the gambling sector when developing standardisation of STR/SAR template(s) at EU level.
- tax advisors, auditors, external accountants, notaries and other independent legal professionals: Member States should provide guidance on risk factors arising from transactions involving tax advisors, auditors, external accountants, notaries and other independent legal professionals. They should also issue guidance on enforcing the legal privilege and on how to distinguish legal services subject to the very essence of the legal privilege from other services not subject to legal privilege when provided to a single client; and
- MVTS: competent authorities should provide the MVTS sector with further risk awareness and risk indicators on terrorist financing.
> Special
and ongoing training for obliged entities
Training sessions ensured by competent authorities should cover the risk of infiltration or ownership by organised crime groups. This recommendation should apply to the following sectors:
- gambling sector: for betting, in addition to staff and compliance officers, Member States should envisage mandatory training sessions for betting retailers focused on appropriate risk assessment of their products/business model
- TCSPs, tax advisors, auditors, external accountants, notaries and other independent legal professionals, service providers related to advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings: the training sessions and guidance on risk factors should focus on non-face-to-face business relationships, off-shore professional intermediaries, customers or jurisdictions; and complex/shell structures
- real estate: specific trainings should include red flags for cases where several professionals are involved in the real estate transaction (estate agent, legal professional, financial institution); and
- MVTS: obliged entities should provide mandatory trainings to agents to make them aware of their AML/CF T obligations and show them how to detect suspicious transactions.
> Annual reporting from competent authorities/self- regulatory bodies on the AML/CFT activities of the obliged entities under their responsibilities.
This reporting obligation will help national authorities conduct their national risk assessments and allow for more proactive actions to deal with weaknesses or failures to comply with AML/CFT requirements in the following sectors:
- real estate: the report should include the number of reports received by the self-regulatory body and the number of reports transmitted to the FIUs when those professionals are reporting via a self-re gul ato ry body; and
- tax advisors, auditors, external accountants, notaries and other independent legal professi onals: the report should include the number of on-site inspections carries out by self-regulatory bodies to monitor AML/CF T compliance, the number of reports received by the self-regulatory body and the number of reports transm itted to the FIUs when those professionals are reporting via a self-re gul ato ry body.
5. Conclusions
The SNRA shows that the EU internal market is still vulnerable to ML/TF risks.
Terrorists use a wide range of methods to raise and move funds and criminals employ more complex schemes and take advantage of new opportunities to launder money offered by the appearance of new services and products. Preventing the misuse of the financial syste m is crucial to limit the capacity of terrorists and criminals to operate and to deprive organised crime of the economic benefits which are the ultimate goal of their illegal activities.
The solid assessment carried out in the last two years has highlighted the need to refine certain elements of the legislative framework and strengthen the capacities of public and private actors to implement their compliance obligations.
Some measures are already being pursued, and the Commission will implement new measures outlined in this report to mitigate the risks appropriately. T he Commission invites Member States to implement the recommendations issued in this report expediently. Under Article 6 of 4AMLD, Member States that decide not to apply any recommendations in their national AML/CF T regimes, should notify the Commission of
their decision and provide a justification for it ("comply or explain"). In the absence of such notifications, Member States are expected to implement those recommendations.
In order to be effective AML/CFT policies should adapt to the development of the financial services, the evolution of the threat and the emergence of new risks. For this reason, the Commission will monitor the actions taken by Member States based on the SNRA findings and report on these findings at the latest by June 2019. That review will also assess how measures implemented at EU and national level impact on risks level. Faced with an evolving challenge which profits from any new loophole, all actors must remain vigilant and increase their efforts and cooperation: concerted action is more necessary than ever to combat money laundering and terrorism financing and thus reinforce the stability of the internal market and improve the security of EU citizens and society as a whole.