Tue, Feb 25th, 2014

http://www.out-law.com/en/articles/2014/february/new-eu-wide-anti-money-laundering-framework-to-include-public-register-of-companies-beneficial-owners/

The Economic Affairs and Justice and Home Affairs committees also voted to include casinos within the scope of the draft rules, which must now be approved by the full European Parliament before negotiations can begin between member states and the European Commission. However, member states would be able to choose to exclude "low risk" gambling services from the proposed new regime.

"The outcome of this vote is a big step forward in the fight against tax evasion and a clear call for more transparency," said Judith Sargentini of the parliament's Civil Liberties committee.

"With this vote Parliament has shown, from left to right, that it is in favour of public beneficial ownership registers, and thus sends a strong signal to the Council for forthcoming negotiations on the file. By approving the establishment of beneficial ownership registers, the committees have shown that they are serious in their demand to finally break with the tradition of hidden company ownership," she said.

Money laundering occurs when the proceeds of criminal activity are concealed by using the financial system to disguise the source of the money or change its form. It is usually criminalised alongside terrorist financing, which refers to the provision or collection of funds in any form with the intention that those funds will be used in order to carry out terrorist offences. Money laundering accounted for 2.7% of global gross domestic product (GDP) in 2009, or $1.6 trillion, according to the UN.

The European Commission published its new draft Anti-Money Laundering Directive in February 2013. It updates the existing legal framework, which dates back to 2005, to take account of advancements in technology and to cover "new threats and vulnerabilities", including an explicit reference to tax crimes. The draft provides for checks on all financial transactions involving cash payments of €7,500 or more, with a threshold of €15,000 for transactions not involving cash. It is accompanied by a draft regulation governing the information that must accompany fund transfers.

The draft rules would apply to banks and financial institutions, auditors, lawyers, accountants, notaries, tax advisors, asset managers, trusts and real estate agencies. They would cover activities such as converting property or disguising its true nature, source and ownership, whether in a member state or a third country, if done intentionally; and would also apply to taking part in or facilitating such activities. Member states would be able to exclude some activities and people from the scope of the rules where there is little risk of wrongdoing, and would also be able to extend the scope of the rules to cover other cases where there is a high risk of money laundering.

The creation of centralised public ownership registers was not envisaged as part of the initial proposal, but follows similar commitments to greater transparency by members of the G8 group of leading global economies. The new proposal would cover all sorts of legal arrangements including companies, foundations and trusts. EU member states would be required to make the registers publicly available following "prior identification of the person wishing to access the information through basic online registration", but would only be able to disclose the "minimum information necessary" in order to protect the privacy of the owners of these structures.

The UK is expected to back the creation of a central register of companies' beneficial owners, which would include individuals who hold 25% or more of a company's shares or voting rights or who otherwise control the way the company is run. It is proposed that this register would be maintained by Companies House. The UK government is expected to publish its response to a consultation on the proposals shortly.

The committees' amendments will be voted on by the full European Parliament in March. If accepted, the new Parliament to be elected in May will begin negotiating the final legislation with the Commission and EU Council of Ministers in the second half of 2014.