New law on money laundering and prevention of terrorism

Analyse On 16 October 2017, the new law on money laundering and prevention of terrorism has entered into force.

In a previous article, we have discussed the introduction of the UBO register into Belgian law by the law of 18 September 2017. Besides, that law contains numerous essential modifications in comparison to the law of 11 January 1993 that it abrogates. In this article, we will briefly present those modifications.

The law of 18 September 2017 on the prevention of money laundering and terrorist financing and the restriction on the use of cash, published in the Belgian Official Gazette of 6 October 2017 and entered into force on 16 October 2017, ensures the transposition into Belgian law of Directive (EU) 2015/849 issued on 20 May 2015 and is inspired by the important developments at a European and international level, including the recommendations of the Financial Action Task Force (FATF).

1. Scope

The scope of the new law is increased in many ways.

The law applies to 33 obliged entities, acting within the scope of their professional activities: this list includes for example the National Bank of Belgium, the credit institutions, the Deposits and Consignments Fund, the settlement institutions, the insurance companies, the notaries, the lawyers,…

Among those, a residual category is created in order to cover the professionals of the financial sector whose activities are not regulated yet but could be in the future.

While only the casinos were targeted by the law of 11 January 1993, the scope is broadened to the providers of gambling services, including those that offer the exploitation of online games.

The notions of “beneficial owners” and “politically exposed person” are defined more precisely. In order to combat corruption, this last notion includes from now on the members of legislative bodies similar to the parliament; the members of the governing bodies of political parties; the directors, deputy directors and members of the board or equivalent function of an international organisation.

Finally, the interns working as external accountants and tax advisors are now subject to the obligations regarding the fight against money laundering.

2. The risk-based approach

The risk-based approach is not new. It implies that the obliged entities are expected to carry out a preliminary analysis and assessment of the risk of money laundering. That way, they can reduce the measures to be adopted in situations where the risk is low and increase the measures for high-risk situations. In other words, there must be proportion between how the obliged entities carry out their legal obligations and the risks they encounter in practice.

The new law realises and strengthens the application of this approach and generalises it to all the obligations provided for by the law, in particular the due diligence obligation. The annexes to the law provide for lists of factors and types of evidence of potentially higher risk or lower risk.

In the framework of the assessment of the risks, the law introduces a cascade process for the identification and the assessment of the risks of money laundering and terrorist financing. It implies in broad terms that the risks are assessed at a European level by the Commission, at a national level by each Member State, and at an individual level by the obliged entities.

3. Use of cash

Since 1st January 2014, it is forbidden to make payments amounting to more than EUR 3,000 in cash.

The law gives some clarifications and provides that a payment or a donation cannot be made or received in cash beyond EUR 3,000 or its equivalent in another currency, in the framework of an operation or a set of operations that seem to be connected.

This restriction applies to all payments, including the donations, made to any natural or legal person. Formerly, only the payments to merchants and professionals were targeted. The new law has also abandoned the 10% rule whereby when the value of the operation was bigger than EUR 3,000, the maximum amount that the professional could accept corresponded to 10% of the total, with a maximum of EUR 3,000.

4. Other innovations

Among the many innovations, a maximum period of 10 years after the end of the business relationship with the customer or after the date of an occasional transaction is from now on set up for the retention of the personal data by the obliged entities.

The new law is much more severe and provides for various administrative sanctions for the obliged entities. Therefore, the legal persons may be sanctioned with a fine ranging from EUR 10,000 to maximum 10% of the total annual turnover according to the latest available accounts, while the natural persons incur a fine between EUR 5,000 and EUR 5,000,000 depending on the circumstances provided for by the law.

Criminal sanctions are also provided for the persons who stand in the way of the inspections and verifications by the supervisory authorities to which they are bound in the country or abroad, or who refuse to give the information they are required by law to provide, or who give deliberately inaccurate or incomplete information.

The collaboration between EU Financial Intelligence Units and the European Commission is enhanced. Moreover, pursuant the Directive, the European Commission should list the high-risk third countries.

5. Conclusion

While this new law does not revolutionise the subject, aside from the introduction of the UBO register, it brings anyway many innovations in order to prevent the money laundering and the terrorist financing. The obliged entities must remain particularly attentive to those evolutions in order to comply with their obligations.

Please note that the law could already be the subject of modifications in the future further to the submission of a fifth anti-money laundering directive. Indeed, the legislator has to face up to new challenges: virtual currencies and prepaid cards are only a glimpse.

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Leo Peeters

Leo Peeters