Each member state in the EU should have transposed the 5th Anti Money Laundering Directive (AMLD) into national legislation by the 10th of January 2020. By making significant changes to the existing regulatory framework, EU member states aim in becoming more reactive to the continually evolving threat of Money Laundering and Terrorist Financing.
Furthermore, the AML 6th Directive is already published in the Official Journal of the European Union. The Member States must implement it in their national legislation by no later than the 3rd of December 2020.
Cyprus, like the rest of the EU member countries, sooner or later are transposing this Directive into national legislation. The new regulatory framework is triggering an amendment of both the AML Law and relevant Directives.
The 5th Anti Money Laundering Directive (AMLD)
The main areas to be affected by the new requirements of the Directive are the Beneficial Ownership (UBO), the Politically Exposed Persons (PEPs), High-Value Goods, High-Risk Third Countries as well as Cryptocurrencies and Prepaid Cards.
Beneficial owners, through shares, voting rights, ownership interests, bearer shareholding, or control via other means, have to provide to the corporate and other legal entities all the necessary information.
Beneficial Owner (UBO), means any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted; (interest of more than 25% plus one of the voting shares or rights)
A significant change is a requirement to register UBOs and made this information publicly available.
In line with the new Directive, Cyprus is establishing effectively Central Registers:
- First to be maintained by the Registrar of Companies will cover the UBO reporting obligations by Corporate and other legal entities;
- Second is set up by CySEC to hold UBO information for Trusts, Express and Constructive, and other legal arrangements.
- Furthermore, banks are required to maintain their own registers to include the bank or payment accounts as well as Safe-deposit Boxes UBOs. A new requirement from Obliged Entities is to establish and verify the identity of the Customers and UBOs before any transaction or business relationship.
Access to Registers
The 4th AML provisions provided for unlimited access to the registers by Competent Authorities and access within the framework of Customer Due Diligence (CDD) by obliged entities as defined in Section 59 of the AML Law.
The 5th AML provides additionally for access by the public, (natural or legal persons) as well. The need to demonstrate a legitimate interest for access will be eliminated except for trusts and similar legal arrangements. In that case, access to beneficial ownership information will be granted to any natural or legal person that can demonstrate a legitimate interest as well as to any person filing a request in relation to a trust or similar legal arrangement which holds or controls any corporate or other legal entity.
Concerning Trusts and other types of legal arrangements, legitimate interest should be governed by the law of the Member state where the trustee is established or resides. Member states should define legitimate interest, both as a general concept and as a criterion for accessing beneficial ownership information in their national law.
Member states should also ensure that access to beneficial ownership information is following data protection rules.
Beneficial Ownership information will be available and effected through online registration and the payment of a fee.
In addition to the credit and financial institutions, the 5th AML extends its scope of Obliged Entities to include, businesses dealing in all sorts of E-Money, Virtual and Crypto Currencies, Custodian Wallets and Prepaid Cards;
Customer Due Diligence (CDD) is now required for amounts over €150, instead of €250, which has been the case under 4th AML. Furthermore, entities dealing in any other valuable assets, like real estate, are now obliged to conduct CDD and report suspicious activity.
PEPs and PPFs
The categories of individuals who can be regarded as PEPs have been broadened.
- Members of governing bodies or political parties,
- Directors and members of the board or equivalent function of an international organisation,
Domestic PEPs are also in the scope for EDD measures.
In addition to the list of names with PEPs, the EU member states will be issuing lists with all positions qualifying as Prominent Political Functions (PPFs).
The lists will be extended to include international organisations; this should make the lists updating and maintenance by Obliged Entities easier.
High-Risk Third Countries
When doing business with customers from countries designated by the EU as ‘High-risk third countries’? Enhanced CDD measures are required by 5th AML from Obliged Entities to cover the gaps of these countries AML legislations.
The above is just a summary of the main changes brought about by the EU 5th AML Directive into effect Jan 2020 and is meant to provide guidance and not legal advice. We remain at your disposal should you have any questions covered in this article.
We help you
Should you need more information on setting up a presence in Cyprus and ensure compliance with the new 5th AML EU Directive we are here to help you along! Get in touch with us for your Structuring Considerations.
We can assist in putting in place structures which give due consideration to international tax provisions and conditions, and personal as well as family circumstances, and provide the necessary support and resources to maintain it in a compliant manner successfully.
C.X Financia is ready to support you get successfully prepared for the AML changes. Our experienced team is prepared to help your AML department address modern challenges in today’s demanding and continuously changing environment. We can help your internal team perform a gap analysis and review your policies and procedures.
Check out our Training Proposals tailor-made to your personnel as necessary.