Laura Spooner, Practice Management and Compliance Associate at LexisNexis, discusses the long-awaited Fourth Money Laundering Directive (4MLD) and gives some tips on surviving the journey.
Where are we going and why?
The Financial Action Taskforce (FATF) gave Europe a nudge and everyone decided it was time to embark on a trip.
The final destination is pretty much mapped out – we know it’ll look a lot like the FATF recommendations, but what should you be particularly aware of?
Risk based approach (RBA)
Greater emphasis on RBA presents both challenge and an opportunity.
You’ll need to identify, understand and manage risks, document your decisions and be able to explain them to the authorities.
Simplified due diligence will go, with no more automatic exemptions to the client due diligence (CDD) process.
Politically exposed persons (PEPs)
As most of us already suspected, foreign and domestic PEPs aren’t that different after all, and 4MLD sets that in stone. You won’t be able to treat them any differently anymore.
Grouping policies and procedures
A new requirement that multinational firms have group-wide policies and procedures, implemented at branch level, is an additional headache under 4MLD. Any local differences in requirements following national implementation will just have to be ironed out by firms.
There’s a lot more to 4MLD— harmonised sanctions regime for breaching the CDD, reporting and record keeping requirements, and black/white lists and data protection all feature too.
So you know where you should be going, you’ve packed six weeks’ worth of clothes in the car, and stocked up on humbugs and wet wipes. Time to round the kids up.
Somewhere on the M4
The SatNav is shrieking— there’s something new— central registers.
These weren’t included in the initial proposal but were added by MEPs during negotiations.
Ultimate, beneficial owners (BOs) of companies and other legal entities (the human beings directly or indirectly owning or controlling a company and its activities) must be listed in central registers which will be open to the authorities and anyone with a ‘legitimate interest’.
To access a register, a person will have to demonstrate a ‘legitimate interest’ in suspected money laundering, terrorist financing, etc.
Leigh Delamere services
No long family car journey is complete without a pit-stop, and this is where we’re at now – sipping a much needed Costa while the kids run off a bit of steam.
Those last loose ends just need tying up and endorsed by the full Parliament (expected April at the time of going to print) and by the EU Council of Ministers. MSs then have two years to transpose 4MLD into national law.
The last leg— A48
Once the final deal is done in Europe, the Treasury will issue a consultation on how the government will implement 4MLD in the UK. The consultation will include draft regulations and any proposed amendments to existing legislation.
The Law Society predicts this will all come into effect during the first half of 2016.
The final destination— Carmarthen
A relief from the ‘are we nearly there yets’ and constant bickering and in 4MLD terms, you’ll know what you have to do.
So take a moment to reflect on the journey and question once again why you didn’t just go to the nearest Center Parcs.
Quite how it’ll all unravel is anyone’s guess. Maybe next year we should all go to Canada… (Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7).
Here to help
Consider us here at Lexis®PSL Practice Compliance as your 4MLD reps. We’ll continue to monitor the situation closely and provide you with all the guidance and tools you need to make this trip as painless as possible.
LexisPSL Practice Compliance is an online toolkit that makes risk and compliance easier to manage. It comes with everything you need to get your compliance house in order and keep it that way: practical guidance, templates, flowcharts, checklists and other time-saving tools. Find out more here.