Sun, Dec 21, 2014

EU law makers within the European Parliament and the Council of Ministers have reached political consensus on stiffer anti-money laundering rules which are expected to be formally finalised next year.

Under the deal struck by negotiators for the Parliament and Council, businesses would be required to provide information about the ultimate beneficial ownership of their company to new central registers to be operated by EU countries.

The data on the registers would be accessible to regulators and other "competent authorities" without restriction, and banks and other "obliged entities" would also be able to access the information when conducting 'know your customer' (KYC) checks.

In addition, individuals that could demonstrate a "legitimate interest" in the data, such as journalists, could also gain access to the information, according to statements issued by the Parliament and the Italian presidency of the Council.

“The obligation placed upon EU member states to maintain central registers listing information on the ultimate beneficial owners of corporate and other legal entities, as well as trusts, will enable greater transparency in financial transactions," financial services litigation and compliance expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said. "This will no doubt make it more difficult for transactions to mask money laundering activity."

"This obligation will also make it easier for regulators and prosecutors to identify potential wrongdoing and to identify those businesses who are either intentionally or unknowingly caught up in illicit activity. Certain financial services firms will have access to a wider range of information in order to conduct customer due diligence and there is no doubt that they will have to ensure they take full advantage of this to avoid the wrath of regulators for failing to take appropriate steps to prevent financial crime," he said.

However, Ruck said that there are data protection concerns that must be taken into account when facilitating access to the register data to those pursuing a 'legitimate interest'.

"The wider availability of information including an individual’s name, month and year of birth, nationality, residency and details on ownership raise significant risks regarding inappropriate access or use of such personal data, in particular, due to the provision that this information will be accessible to people or organisations who can demonstrate a 'legitimate interest', such as investigative journalists and other concerned citizens," Ruck said.

"Only time will tell if these provisions extend to anyone placing their private residence in trust for their children upon their death being required to provide a range of personal data for storage on a central register. A balance must be found between addressing the risks of money laundering with the protection of each individual’s personal data and right to privacy," he said.

The expert said that financial services firms involved in transactions can expect to come under "significant scrutiny to identify the beneficial owners of those involved" and should expect to be on the end of "swift and significant action from prosecutors and regulators should they fail to meet the requirements".

A spokesperson for the European Parliament told Out-Law.com that the text of the new anti-money laundering rules agreed on by the Parliament and Council negotiators is not yet available. They said that it is likely to be January before the text is available, after the expected endorsement of the agreement by the Council's Permanent Representatives Committee (COREPER) and the European Parliament's Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees.

Final approval of the new rules is needed by a formal vote of the Parliament and the Council before the new regime can be introduced.