The EU's Fourth Money Laundering Directive (4MLD) comes into force today. Countries will have two years to turn the directive into national law.
4MLD applies to a range of businesses, from banks and other financial institutions to auditors and accountants. The rules will also have to be complied with by any other kinds of businesses involved in making or receiving cash payments for goods worth at least €10,000, regardless of whether payment is made in a single, or via a series of linked, transactions.
The new regime will bring into force new customer due diligence checking requirements, together with new obligations to report suspicious transactions and maintain records of payments. Businesses subject to the rules will also have to install internal controls to combat money laundering and terrorist financing activities under the framework.
In addition, EU countries must set up registers to record the ultimate 'beneficial' owners of businesses. The registers will be accessible by 'authorities' within each country, to 'obliged entities' such as banks doing due diligence into customers, and to others, such as investigative journalists, who can demonstrate a 'legitimate interest' in gaining access to the information.
The Directive also clarifies the rules on 'politically-exposed persons' – people at a higher than usual risk of corruption due to the political positions they hold, such as heads of state, members of government, supreme court judges, and members of parliament, as well as their family members.
Where there are high-risk business relationships with such persons, additional measures should be put in place, e.g. to establish the source of wealth and source of funds involved.
MEPs also approved a 'transfers of funds' regulation, which aims to improve the traceability of payers and payees and their assets. This comes into immediate effect.