The Fifth Anti-Money Laundering Directive

News A recently published fifth Anti-Money Laundering Directive brings a number of modifications to the legislation on this subject.

While a Royal decree has to define the operating procedures for the register of ultimate beneficial owners ("UBO register") established by the fourth Anti-Money Laundering Directive of 20 May 2015, and described in an article you can consult by clicking here, the fifth Directive of 30 May 2018 already brings a series of new rules and modifications to the fourth Anti-Money Laundering Directive.

We will discuss them briefly below.

1. Scope of the law

Some additions are brought to the list of people who are liable for the obligations of the fourth Anti-Money Laundering Directive.

In addition to the auditors, external accountants and tax advisors, a wider residual category now targets "any other person that undertakes to provide, directly or by means of other persons to which that other person is related, material aid, assistance or advice on tax matters as principal business or professional activity". 

The Directive is from now on applicable to estate agents including when acting as intermediaries in the letting of immovable property, but only in relation to transactions for which the monthly rent amounts to EUR 10 000 or more.

Finally, are also subjected to the fourth Anti-Money Laundering Directive:

  • providers engaged in exchange services between virtual currencies and fiat currencies;
  • custodian wallet providers;
  • persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of linked transactions amounts to EUR 10.000 or more;

2. The UBO register

The new Directive maintains the distinction concerning access to core information on the beneficial ownership between legal entities active within the EU on the one hand and trusts and similar structures on the other hand. 

2.1. Companies

The Royal decree concerning the operating procedures of the UBO register is currently in final phase of drafting and should be published and brought into force in the course of the 3rd quarter of 2018. Although, the fifth Directive already brings new elements which the Belgian legislator will have to take into account.

The Directive establishes an obligation to cooperate for the beneficial owners. Indeed, the beneficial owners of corporate and other legal entities will have to provide those entities with all the information necessary for them to comply with the information requirements, including through shares, voting rights, ownership interest, bearer shareholdings or control via other means.

In terms of access to the information on the beneficial ownership, this information will have to be accessible in all cases to "any member of the general public", without having to prove legitimate interest.

Besides, it is expressly planned in the Directive that the tax authorities are "competent authorities granted access to the central register". It should be noted that the law of 26 March 2018 concerning the strengthening of the economic growth and the social cohesion already foresees that the administration can, when it comes to a given taxpayer, consult the UBO register to insure the just tax collection.

The fifth Directive includes a number of deadlines for Member States to meet. 

They have until 10 January 2020 to set up their Register of information on beneficial owners of corporate and other legal entities.

The Commission will have to ensure the interconnection of Member States’ registries via the "European central platform", in cooperation with Member States, at the latest on 10 March 2021. 

Also within the framework of the European cooperation, Member States may not prohibit or place unreasonable or unduly restrictive conditions on the exchange of information or assistance between competent authorities. The directive sums up a number of motives for refusal upon which a competent authority cannot call to justify the rejection of a request for assistance. Motives such as "the request is also considered to involve tax matters" or "there is an inquiry, investigation or proceeding underway in the requested Member State" are not sufficient to reject a request for assistance from a Member States’ competent authority. This will undoubtedly favour the exchange of information between Member States and, let us hope, favour a bigger transparency.

2.2. Trusts and similar legal arrangements

The fifth Directive develops the provisions of the fourth Directive concerning trusts.

The disclosure obligation concerning the beneficial owners applies to trusts and to the other types of legal constructions. It is besides specified in the fifth Directive that these similar legal constructions can be « fiducie, certain types of Treuhand or fideicomiso, where such arrangements have a structure or functions similar to trusts ».

Access to information on trusts and similar structures requires evidence of a legitimate interest and can be made subject to fees and online registration.

To guarantee the legal safety and identical conditions for all, Member States have to identify the characteristics allowing to determine the cases where the legal constructions have a structure or functions similar to trusts with regard to such legal arrangements governed under their law. The aim should be to prevent the use of trusts or similar legal arrangements for the purposes of money laundering, terrorist financing or associated predicate offences.

Member States ensure that the trustees or the people occupying equivalent positions in similar legal constructions declare their status and supply the information in due course (about the identity of the settlors, the trustees, the protectors, the beneficiaries or class of beneficiaries and any other natural person exercising effective control of the trust) to obliged entities, where, as a trustee or as person holding an equivalent position in a similar legal arrangement, they form a business relationship or carry out an occasional transaction above the thresholds set out in the fourth Directive.

Member States shall require that the beneficial ownership information of express trusts and similar legal arrangements shall be held in a central beneficial ownership register set up by the Member State where the trustee of the trust or person holding an equivalent position in a similar legal arrangement is established or resides.

Member States should set up beneficial ownership registers for trusts and similar legal arrangements by 10 March 2020.

The Commission, in cooperation with Member States, will have to insure the interconnection between registers via the "European Central Platform" by 10 March 2021. This would make this information accessible in the whole Union, and would also ensure that multiple registration of the same trusts and similar legal arrangements will be avoided within the Union.

3. Measures against anonymity

In addition to the ban made for credit institutions and financial institutions to keep anonymous accounts and anonymous passbooks, it is now also forbidden to hold anonymous safe-deposit boxes. The owners and beneficiaries of existing anonymous accounts, anonymous passbooks or anonymous safe-deposit boxes must be subjected to the customer due diligence measures no later than 10 January 2019.

Member States shall ensure that credit institutions and financial institutions acting as acquirers only accept payments carried out with anonymous prepaid cards issued in third countries where such cards meet the necessary requirements, notably :

  • The maximum amount stored by and the maximum monthly payment transactions limit of electronically anonymous prepaid cards may not exceed the amount of 150 €;
  • anonymous cash withdrawal with electronically anonymous prepaid cards is limited to 50 €.

Member States may also decide not to accept payments carried out by using anonymous prepaid cards on their territory.

4. Transposition

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 10 January 2020.

It thus remains to be seen if the Belgian legislator joins the novelties of this Directive into the Royal decree to appear at the end of this year, or if the publication of this Royal decree shall be postponed.

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Leo Peeters

Leo Peeters