An IMGW.News Report:
Following years of deliberation, the EU proposes strengthened regulations to combat money laundering and terrorist financing, now encompassing investment migration operators among other sectors.
The European Union is set to introduce a robust new regulation, AMLD6, designed to significantly enhance the prevention of money laundering and terrorist financing within its financial system. Expected to be made public by June/July 2024, this regulation is a key component of the EU’s comprehensive legislative package aimed at strengthening its anti-money laundering and counter-terrorist financing (AML/CFT) framework.
“For investment migration operators, including brokers and related advisors within and outside the EU, this means adapting to a more rigorous compliance environment, which could increase operational costs and require significant changes to their current practices.”
The proposals uplift the existing regime through the introduction of new rules, updating and refining existing requirements, and providing a new approach to supervision. With EU member states currently pursuing their own approaches to supervision and having different expectations with respect to directive implementation and control execution, this will present a significant change for financial institutions (FIs).
Investment Migration (IM) Operators Now Obliged Entities
In a significant development, AMLD6 includes “investment migration operators” as new obliged entities. These operators, who provide services to third-country nationals seeking residency rights in exchange for investments, will now be subject to stringent AML/CFT obligations. This move aims to ensure the legitimacy of funds and investments and prevent the misuse of IM programmes for illicit purposes.
The AML/CFT legislative package includes several key components: the AML/CFT Regulation (AMLR), which establishes uniform rules for the private sector; the 6th AML/CFT Directive (AMLD6), defining responsibilities for competent authorities; the Regulation Creating an AML/CFT Authority (AMLAR), which sets up an authority to oversee the EU’s AML/CFT architecture; and the Transfer of Funds Regulation Recast, enhancing the traceability of crypto-asset transfers.
Impact of New AML Rules on Investment Migration
The new AML rules under AMLD6 are set to significantly disrupt the investment migration industry. By categorising investment migration operators as obliged entities, these businesses will now be subject to stringent AML/CFT obligations. This includes comprehensive customer due diligence, regular reporting, and enhanced scrutiny of funds and investments. The new regulations aim to prevent the misuse of residency and citizenship programmes for illicit purposes, ensuring that only legitimate investments are made.
For investment migration operators, including brokers and related advisors within and outside the EU, this means adapting to a more rigorous compliance environment, which could increase operational costs and require significant changes to their current practices. There will also be a need for extensive training and improved certification processes to ensure that all staff are fully compliant with the new regulations. These disruptions are expected to lead to a higher level of transparency and integrity within the industry, aligning it with the EU’s broader objectives of combating financial crime and protecting the integrity of its financial system.
Key Provisions of AMLD6
1. Beneficial Ownership Registers: AMLD6 mandates accessible beneficial ownership registers for bank accounts, securities accounts, and real estate to competent authorities and individuals with legitimate interest, aligning with European Court of Justice rulings.
2. Suspension Powers of FIUs: Financial Intelligence Units (FIUs) gain authority to suspend transactions or business relationships suspected of money laundering or terrorist financing for up to 10 working days.
3. Customer Due Diligence (CDD): The regulation introduces significant changes to Customer Due Diligence (CDD), lowering the threshold for occasional transactions requiring CDD from EUR 15,000 to EUR 10,000. It also mandates full CDD for crypto-asset service providers (CASPs) when transaction values exceed EUR 1,000.
4. New Obliged Entities: The regulation expands the scope of entities subject to AML/CFT obligations to include dealers in high-value goods and precious metals, crowdfunding service providers and intermediaries, credit intermediaries, investment migration operators, and professional football clubs and agents.
5. Crypto-Asset Transfers: There are also new rules on the inclusion of customer data in crypto-asset transfers via an extension in the scope of the existing wire transfer regulation.
Enhanced Supervisory Framework
The establishment of the Anti-Money Laundering Authority (AMLA) will be central to the EU’s supervisory system. It will directly oversee high-risk entities and coordinate efforts across national supervisory authorities. Joint Supervisory Teams, consisting of AMLA staff and national supervisors, will conduct reviews and inspections.
Implementation Timeline
The final texts of AMLD6, AMLR, and AMLAR are expected to be published in the EU Official Journal between June and July 2024, with full application of the Transfer of Funds Regulation (Recast) by December 2024.
Perspectives
The introduction of AMLD6 and the broader legislative package marks a significant step towards the long-discussed and anticipated integrated and effective EU-wide AML/CFT framework. By including investment migration operators and other newly obliged entities, the EU is working to demonstrate its commitment to closing loopholes and ensuring comprehensive coverage in the fight against financial crime. These regulatory overhauls are designed to provide stronger, clearer rules for both public authorities and private entities, fostering better cooperation and uniformity across the EU. These developments form part of the EU’s drive to protect the integrity of its financial system and ensure the safety of its citizens. The new legislative package is set to strengthen these efforts by introducing uniform regulations and enhancing cooperation among member states.