Anti-Money Laundering Directive Research Articles

Unternehmen werden durch dasselbe EU-Recht in den Mitgliedstaaten sehr unterschiedlich belastet – hier am Beispiel des Transparenzregisters

Abstract In order to prevent money laundering and terrorist financing, the European Union has issued the so-called Anti-Money Laundering Directive, on the basis of which a transparency register has been set up in every EU member state. This register is identifying the beneficial owners of legal entities. This article is looking into the costs and bureaucratic burdens associated with registration for company requirements in France, Italy, Austria and Germany and the reasons for the sometimes considerable differences.

Commission

This overview highlights the Commission’s (i) proposal to follow the OECD agreement on Pillars One and Two as regards the design of the EU single corporate tax rulebook, (ii) proposal for a 6th Anti-Money Laundering Directive, (iii) proposal to continue authorizing Germany to exclude the right to deduct input VAT for certain supplies for private purposes, (iv) provision of technical rules on automated exchange of information related to an import scheme, (v) decision to appeal the General Court’s decision on the Amazon State aid case in Luxembourg, and (vi) several actions brought against certain Member States on diverse tax matters.

Under construction: Trusts, trust-like structures, foundations and beneficial owners registries in the European Union—The Czech perspective

Abstract Searching for a comprehensive EU policy on preventing money laundering, terrorist financing and abuse of the international financial system will be a hot topic in the EU for the next couple of years. Directive (EU) 2018/843, known as the 5th Anti-Money Laundering Directive, follows the trend set by the 4th AML Directive in 2015 and inter alia introduces new requirements concerning the extent to which trust structures must be registered in the beneficial ownership registries across the EU as well as the public accessibility of the information held in such registries. This article addresses the main problematic issues that have appeared in recent professional discussions in the Czech Republic in connection with the new UBO Registry Act, in effect from 1 June 2021.

Money laundering through cryptocurrencies - analysis of the phenomenon and appropriate prevention measures

PurposeThe aim of this paper is to assess the relevance of cryptocurrencies with regard to the money laundering risk on the market and to present widespread money laundering techniques and recognizable patterns of abuse. In addition, this paper aims to find an answer to the question to what extent the measures of the fifth EU Anti-Money Laundering Directive (AMLD) as well as other appropriate preventive measures are sufficient to reduce the money laundering risk in the area of virtual currencies (VC).Design/methodology/approachFirstly, the analysis requires a consideration of the theoretical foundations of money laundering methods, as well as a presentation of the technical foundations of cryptocurrencies and their ecosystem. Secondly, it is discussed to what extent VC are suitable for money laundering, which characteristics enable them to launder money and which new money laundering techniques result from this. In addition, a comparison of different money laundering risk classification is done in relation to VC from the perspective of different actors in the financial market.FindingsOwing to their simple electronic storage and transferability, crypto assets pose a concrete risk of money laundering. Their inclusion in the fifth AMLD was therefore a necessary step by the European legislator. However, the question arises to whether the directive and the further preventive measures presented in this paper sufficiently fulfil the objective of reducing the money laundering risk in relation to VC. One positive aspect is the inclusion of the crypto custody business as a financial service in the German Banking Act. According to the definition in Section 1 (1a) sentence 2 no. 6, the offering of wallets is subject to authorization and the offering party becomes an obligated party within the meaning of the Germany Money Laundering Act. From a supervisory point of view, the new licensing requirement is very much welcomed, as the custody of private cryptographic keys entails considerable risks. However, non-custodian wallet providers who do not store the private keys of their users, are not covered. A closer analysis of the amending directive to the fourth EU AMLD reveals that other relevant players in the crypto market, such as mixer and tumbler services, are also not covered.Originality/valueIt is quite clear that cryptocurrencies and the blockchain technology will continue to accompany one in the coming years. Further credit institutions arising in the market exposed to the described risks will be seen. The paper will therefore present and evaluate possible risk reduction/options for anti-money laundering for new and existing financial institutions.

The EU Response to Criminal Misuse of Cryptocurrencies: The Young, already Outdated 5th Anti-Money Laundering Directive

Abstract Combatting criminal misuse of cryptocurrencies was at the core of the fatf agenda under the US Presidency, culminating in June 2019 with the thorough extension of international standards against money laundering over virtual assets’ markets. This echoed the first legislative measure regulating virtual currencies adopted by the EU a year before. Directive 2018/843, better known as the 5th Anti-Money Laundering Directive, fails however to address key technological breakthroughs and new business models, which continuously make the ever-growing and fast-paced crypto economy evolve. Against this background, the present contribution investigates shortfalls and challenges that lay ahead in the light of the new fatf Recommendations. It ultimately argues that the preventive anti-money laundering measures cannot dispense with the establishment of a cross-border integrated supervisory and enforcement system.

Tax Crimes as Predicate Offences under the EU Sixth Anti-Money Laundering Directive (2018/1673)

This article provides an analysis of tax crimes as predicate offences in respect of money laundering. While the Fourth Anti-Money Laundering Directive (2015/849) included tax crimes as predicate offences for money laundering in the European Union, it did not go far enough, with certain tax crimes being left out. This article analyses the effect of this development in the context of the Sixth Anti-Money Laundering Directive (2018/1673), which focuses on combating money laundering by imposing minimum rules under the Member States’ criminal laws. The Directive’s transposition date is 3 December 2020.

OECD’s global principles and EU’s tax crime measures

Purpose This paper aims to investigate and provide pathways for leveraging the Organisation for Economic Cooperation and Development (OECD’s) Ten Global Principles (TGPs) for countering tax crimes in the EU. Design/methodology/approach The study is guided by the combination of traditional and innovative research methods drawn from criminal law and justice, public regulatory theory and tax law, based on socio-legal and comparative methodologies. Findings The research shows that EU has achieved considerable amount of progress when it comes to meeting the TGPs. However, law and practice in EU Member States indicate that there are different legal, human and organisational approaches to fighting tax crimes. The TGPs could be strategically applied to complementing the EU’s Fifth Anti-Money Laundering Directive (AMLD) and other initiatives on Administrative Cooperation. Research limitations/implications Although the TGPs appear encompassing, there are opportunities to harness the potency of these principles and to provide more tailored principles that can help engineer sustainable remedies for countering tax crimes in the EU. Practical implications The paper critically analyses, through a multidisciplinary approach, the main legal, human and organisational factors influencing the prosecution of tax crimes in the EU Member States. Social implications Realignment and harmonisation of tax enforcement paractices in the EU Member States thus help in the reduction of tax gap resulting from tax offences. Originality/value The paper provides novel approaches and findings based on empirical info obtained from face-to-face focus groups with end users and law enforcement agencies in tax enforcement eco-system in ten different EU Member States.

Virtual Currencies: New Challenges to the Right to Privacy? An Assessment under the V AML Directive and the GDPR

Abstract The purpose of this article is to analyse virtual currencies, with specific regard to Bitcoins, in light of a specific human right, the right to privacy. In the first part, this contribution will reflect on the effectiveness of the Fifth European Union Anti-Money Laundering Directive (V AML Directive) in ‘regulating’ the exchange between fiat and virtual currencies for the purpose of anti-money laundering and counter-terrorist financing. In the second part, it will explore whether the General Data Protection Regulation (GDPR) is applicable or not to the virtual currencies network.

Blockchain Tokens From the Perspective of German Civil Law: An Updated View

Tokens are increasingly being generated on the basis of blockchain technology, which are intended to embody certain rights and obligations as cryptographically secured electronic coupons or digital coupons or vouchers . This paper provides an overview of the current state of affairs and the legal discussion of recent years and examines the extent to which blockchain tokens can be included under the existing German civil law framework of the BGB (German Civil Code). The key question is how goods can be legally represented (tokenised) digitally and effectively by tokens instead of in documents. There are several approaches to make tokens marketable. Among them are also those that let the right embodied in the token follow the right to -or ownership of- the token. This is followed by the question as to whether the data on the blockchain can provide sufficient evidence that may enable the purchase in good faith, since without that, secondary market trading is not viable. The article concludes with an outlook on possible solutions de lege ferenda, and looks into the question whether the Anti Money Laundering Directive 5 and the subsequent changes re. „Crypto Assets“ in German’y Banking Act, which came into effect Jan 01, 2020, have any civil law impact on tokens. This is an updated English version of https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3361976.

The EU Response to Criminal Misuse of Cryptocurrencies: The Young, Already Outdated 5th Anti-Money Laundering Directive

Combatting criminal misuse of cryptocurrencies was at the core of the FATF agenda under the US Presidency, culminating in June 2019 with the thorough extension of international standards against money laundering over virtual assets’ markets. This echoed the first legislative measure regulating virtual currencies adopted by the EU a year before. Directive 2018/843, better known as the 5th Anti-Money Laundering Directive, fails however to address key technological breakthroughs and new business models, which continuously make the evergrowing and fast-paced crypto economy evolve. Against this background, the present contribution investigates shortfalls and challenges that lay ahead in the light of the new FATF Recommendations. It ultimately argues that the preventive anti-money laundering measures cannot dispense with the establishment of a cross-border integrated supervisory and enforcement system.

Anti-money laundering regulation of crypto assets in Europe’s smallest member state

The paper critically examines the framework for the regulation of crypto assets in Malta, with a particular focus on anti-money laundering and funding of terrorism. It identifies the risks relating to crypto assets, and how these are addressed through Malta's Virtual Financial Assets Framework. To this end, the paper argues that the Maltese framework goes beyond the EU's fifth Anti-Money Laundering Directive. In this connection, the paper also argues that the Maltese framework could possibly be a model for a more extensive EU regime in this context. Finally, the paper sets forth recommendations towards action which may be taken at an EU level in order to address the money laundering and terrorism financing threats associated with crypto assets.

The new Hungarian asset management foundation

Abstract The most important global issues of wealth planning are privacy, asset protection, and tax compliance. The ultimate question is how these needs match with the current and future legal environment. Obviously, privacy is under attack and the implementation of the fifth Anti-Money Laundering Directive is sweeping away the remaining ruins of it. The separation of private and business assets is one of the bases of the legal work and, during the last 10 years, tax compliance was forced out by The Organisation for Economic Co-operation and Development (OECD) Member States, achieving the result that assets are declared and taxed. There is very little room for manoeuvre, if someone wants to achieve all three aims at once. The new Hungarian asset management foundation—a hybrid of a trust and a private foundation—provides an excellent solution to link privacy, asset protection, and tax compliance together.

The treatment of Austrian private foundations under the Ultimate Beneficial Ownership Act

Abstract As part of the implementation of the fourth Anti-Money Laundering Directive in Austria, the Wirtschaftliche Eigentümer Register Gesetz, (The Ultimate Beneficial Owner Register Act) was introduced. The main aim of this Act is to provide accurate and up-to-date information on the ultimate beneficial owner (UBO) of entities, trusts, and foundations. This information is seen as a key factor in combating money laundering and terrorist financing. Paragraph 2 of the Ultimate Beneficial Ownership Act defines the UBO, which corresponds to the definition in paragraph 3 subparagraph 6 of the Anti-Money Laundering Directive. In the case of corporate entities, ultimate ownership and control are relevant for determining the UBO. In the case of trusts and private foundations, it is not ownership and control that are relevant for determining the UBO, but the function the person has with respect to the trust/foundation. All definitions have in common that the UBO has to be a natural person. Obliged entities are required to identify and report their UBOs to the register, in the case of a breach of duty/law severe penalties apply.

Crypto-assets: Commodities under European financial markets law?

This paper sheds light on the legal nature of crypto- assets in capital markets law. There is currently no generally accepted legal definition of the terms ‘crypto–assets’ or ‘cryptocurrency’ aside from the term ‘virtual currency’ in the 5th Anti-Money Laundering Directive. While it is clear that cryptoassets performing payment functionalities are not considered legal tender in the sense of government sanctioned currencies, the question remains whether or not crypto-assets should be considered goods in the context of the European fundamental freedoms and/or commodities in the sense of European capital markets law. This classification, however, bears significant ramifications in various legal areas that are explored in this paper. It will be shown that crypto-assets are goods subject to the freedom of movement of goods guaranteed by articles 28 to 37 TFEU (Treaty on the Functioning of the European Union). On the other hand the authors propose that crypto-assets should not be considered to fall within the definition of commodities as used in capital markets law (eg, MIFID [Markets in Financial Instruments Directive] I and II, Benchmark-Regulation, etc) and are therefore not subject to the regulatory consequences of this qualification, such as potential regulation of market places as commodity exchanges or regulatory reporting obligations related to commodity derivatives.

Regulating the Externality of Money Laundering - Halfway There

Present regulation and recent research regarding the externality problem of money laundering focus on the banks and other financial institutions as being the causes of money laundering and objects of regulation. Focusing on the financial institutions only creates a void, where the clients of these institutions can act without direct regulatory restrictions. Based on the definition of money laundering as presented in the fourth anti-money laundering directive of the European Union, this article analyzes the externality problem of money laundering. The article argues that the regulation is insufficient, because it only addresses the production side of the externality problem and does not include the consumption side of the externality problem. The result is that the regulation does not include all the parties relevant to the prevention and combating of money laundering.

Anti money laundering compliance and the new standards on beneficial ownership

This paper discusses the new Financial Crimes Enforcement Network (FinCEN) rule on beneficial ownership and the general due diligence challenges currently facing financial institutions. Covered financial institutions must comply with these rules by 11th May, 2018, and should consider the most effective means to take immediate steps to modify their anti money laundering (AML) compliance programmes to accommodate this latest expansion of the AML regulatory regime (specifically the USA’s BSA, AML and Counter-Terrorist Financing (CTF) regulations and associated guidance). Although narrated from a US jurisdictional perspective, non-US financial institutions and regulatory regimes (eg, European Union [EU] under the purview of the European Union’s Anti-Money Laundering Directive) are considered within the scope of discussion. It is acknowledged that non-US financial institutions may be required to adapt their compliance programmes to account for the new US beneficial ownership standards. Therefore, possible approaches toward development of universal operational solutions will be presented and assessed. Finally, this paper observes that the misuse of limited liability companies (LLCs) and offshore financial centres (OFCs) can serve as a harbinger of criminal activity and seeks to encourage further the discussion of due diligence governance and controls within the AML compliance community.

Interaction of RegTech with EU privacy, AML and payments regimes

The digital delivery landscape presents myriad opportunities and challenges for online services, and in particular services that are regulated and have anti-money laundering obligations. The introduction of EU-wide regulations such as the Payments Services Directive 2 (PSD2), the 4th Anti-Money Laundering Directive (4AMLD) and the General Data Protection Regulation (GDPR) will greatly affect the digital landscape and economy. This paper focuses on the interaction of RegTech with regulated sector business, how RegTech can be used to meet some of the more challenging aspects of the above regulatory regimes and potential solutions to some of the newly imposed customer-centric regulatory requirements.

Cracking Shells

In early 2016, the International Consortium of Investigative Journalists released a report detailing thousands of leaked documents demonstrating how a Panamanian law firm had, for years, helped wealthy clients conceal their financial activities through the use of offshore shell companies. The Panama Papers, as the leaked documents came to be known, directed renewed attention at the use of shell companies. Shell companies are used by the world’s wealthy and powerful to lower their taxes, but are also used by tax evaders, criminal organizations, and terrorists. While much of the renewed attention has been directed at offshore tax havens such as Panama, the United States is itself considered a tax haven by many, largely due to states such as Delaware, which has long catered to individuals desiring secrecy. In response to the Panama Papers, numerous international jurisdictions have looked to strengthen their laws governing the creation of shell companies and considered the mechanisms used to facilitate exchanges of information. This Article will examine one of those responses—the European Union’s Anti-Money Laundering Directive—as an example of the changes the United States should apply to its own domestic laws and as an example of the multilateral framework needed to address a global issue. This Article will argue that the United States should follow the European Union’s Anti-Money Laundering Directive’s lead in strengthening its laws regarding the disclosure of beneficial ownership information, creating shared registers of beneficial owners, implementing penalties for noncomplying entities, and moving towards creating multilateral, as opposed to bilateral, agreements to combat the misuse of shell companies.

Retention of data in the new Anti-money Laundering Directive—‘need to know’ versus ‘nice to know’

The fourth Anti-Money Laundering (AML) Directive1 was adopted in June 2015, and in July 2016, a little more than one year after the adoption, the procedures for amending it again were initiated.2 As stated in Article 1(1), the AML Directive aims to prevent the use of the financial system in the Member States for the purposes of two well defined and relatively new crimes, money laundering and terrorist financing. It applies to a range of entities, including credit institutions, financial institutions, auditors, accountants, tax advisors, gambling operators, as well as to other legal and natural persons trading in goods, to the extent that payments are made or received in cash in an amount of EUR 10 000, regardless of whether payments are made in a single, or via a series of transactions that appear to be linked. While at this early stage, it is difficult to assess if the AML Directive will help to reach the set goal of preventing that the financial system in the Member States is used for money laundering and terrorist financing, it may assist the detection, investigation, and prosecution of these crimes. The Directive brings into force new requirements for customer due diligence, supported by increased obligations to report suspicious transactions and the duty to retain certain categories of personal data.

Anti-Money Laundering Measures Versus European Union Fundamental Freedoms and Human Rights in the Recent Jurisprudence of the European Court of Human Rights and the European Court of Justice

AbstractThis article will evaluate whether, and to what extent, preventive measures in the fight against money laundering may limit fundamental freedoms and human rights within the European Union (“EU”). It will analyze two judgments rendered by the European Court of Justice (“ECJ”) and one judgment rendered by the European Court of Human Rights (“ECtHR”). In these three cases, the courts were asked to investigate the compatibility of specific Anti-Money Laundering (“AML”) preventive measures with the freedom to provide services enshrined in the Treaty on the Functioning of the European Union (“TFEU”) and human rights. Considering the gravity of the phenomenon, AML measures have gradually emerged as a “European general interest.” The Fourth EU Anti-Money Laundering Directive, which has been recently adopted, displays this compelling need.