Your Fourth Anti-Money Laundering Directive Checklist

The deadline for EU member states to comply with the European Union’s Fourth Anti-Money Laundering (AML) Directive is June 26, 2017. What does this mean for your business? What changes are you required to make within your business sector, and are you ready to implement them?

Let’s break down the key points you need to know before the new Directive takes effect:

More Defined and Focused Risk Assessments: While the Fourth AML Directive still maintains a risk-based approach, there are more clearly defined elements. For instance, each member state will have to review the risks for their specific jurisdiction and share their findings with ‘obliged entities’ (the new term to replace designated individuals). Whilst this still has to be transposed by each EU member state, it is expected that if your business makes or receives any cash payment of €10,000 or more, you are obligated to conduct Customer Due Diligence (CDD). Furthermore, the online gambling industry will now have to conduct due diligence on any customer with accumulative transactions totaling €2,000 or more. It is important to note that this is cumulative, which means, deposits, withdrawals and even bets and wagers. Make sure you have a mechanism in place to trigger CDD at the right time.

Expanded Definition of Politically Exposed Persons (PEPs): The Fourth revision expanded the definition of a PEP to include those individuals who hold a prominent position of power. Even when an individual ceases to be a PEP, they will now still be deemed as one for 12 months after relinquishing their position. Additionally, the fourth AML Directive now includes domestic PEPs. If you are dealing with any director or CEO of a large international company, you need to know about this change.

Increased Customer Due Diligence Requirements: Although not defined by the Joint Money Laundering Steering Group (JMLSG), it is anticipated that Simplified Due Diligence (SDD) will require significant justification. If you have conducted SDD on customers in the past and you are still transacting with them, it is very likely you may have to approach them to conduct Enhanced Due Diligence (EDD). Moreover, all high-risk merchants must now conduct EDD on customers. A high-risk merchant is anticipated to be any non-face-to-face transaction. So, if you are an online merchant, be prepared to have the tools in place to do this or source a third party to conduct this for you.

What can you do to prepare?

Staff Training: Is your staff trained at reasonable intervals on what qualifies as money laundering, how to monitor and report suspicious activity, and how to report such activity? Understanding of the new AML Directive by all staff is essential for full compliance. Failure to comply with any rule could not only result in large financial losses, but also severely damage your brand reputation. By ensuring your staff is well-informed on what should be considered a risk, you are safeguarding them, your business, as well as your MLRO and directors.

Compliance Outsourcing. Fortunately, the Fourth AML Directive allows compliance outsourcing. Better yet, Integrity offers affordable compliance solutions. Simply contact an Integrity compliance representative to find out how we can provide you with a suite of cost-effective solutions for turnkey compliance.

Ben Jordan

Director, European Business Development & Operations

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