By Samantha Sheen, AML Director Europe, ACAMS
5 December, 2016

“It will be of little avail to the people that the laws are made by men of their own choice, if the laws are so voluminous that they cannot be read, or so incoherent that they cannot be understood: if they be repealed or revised before they are promulg[at]ed, or undergo such incessant changes, that no man who knows what the law is to-day, can guess what it will be to-morrow”.

James Madison (1751-1836)

Introduction

By now you’ll have seen a number of articles that refer to the 5th Anti-Money Laundering Directive (“5AMLD”). With most compliance professionals busy with the year-end approaching, I thought I’d provide you with a brief explanation about the 5AMLD along with a summary of the some of the more significant changes described in that Directive.

What is the 5AMLD?

On 8 November 2016, the European Economic & Financial Affairs Council (known as “EcoFin”), met to discuss the European Commission’s action plan against money laundering and terrorist financing activity. The focus was on the further amendments to the 4th Anti-Money Laundering Directive (“4AMLD”), proposed in July 2016, when the action plan was published (see my earlier blog).

As a result of those discussions and additional input received from some parliamentary committees (see below), amendments to the original 4AMLD text introduced in 2015 have been proposed in a separate directive, referred to as the 5AMLD. So the 5AMLD is not a full blown rewrite or replacement to the 4AMLD. The document outlining the proposed content of the 5AMLD is also referred to as the ‘Compromise Text’.

Has the 5AMLD now been agreed? When do these amendments come into effect?

The 5AMLD has not yet been agreed so no changes have been made to the original 4MLD text. It is understood that the European Presidency is aiming for agreement on the amendments proposed in the 5AMLD by the end of 2016 so that negotiations with the European Parliament can start in early 2017.

If the 5AMLD is adopted, the amended version of the 4AMLD is expected to apply from 26 June 2017, although the European Member States will be required to enable access to information about the beneficial ownership of companies from 1 January 2018.

What other Parliamentary Committees Have Reviewed the 4AMLD?

Several committees have reviewed both the original 4AMLD text and the amendments proposed in July 2016. For example, the European Economic and Social Committee (“EESC”) prepared a written opinion expressing its views on what needed amending in the 4AMLD and more broadly, the overall implementation of the 4AMLD’s requirements.

The EESC is a consultative body made up of employer and employee organisations, and representatives of various other interests. The EESC is essentially the voice of the privates sector and has traditionally played an important role in the shaping of EU policy.

The Compromise Text includes a preamble that makes specific reference to having considered the EESC’s written opinion in drawing up the proposed amendments. However, although its opinion has been taken into account, not all of the EESC’s recommendations have been incorporated into the 5AMLD.

Another important set of documents were prepared by the Rapporteur for the Committee on Legal Affairs prepared for the Committee on Economic and Monetary Affairs and the Committee on Civil Liberties, Justice and Home Affairs. These documents comprise a draft opinion mainly about the 4AMLD revisions proposed in July 2016 (“Draft Opinion”) and a separate draft report which includes a series of additional proposed amendments (“Draft Report”).

It appears that these two documents may not have been available prior to the publication of the Compromise Text, and no reference is made to them in its preamble. However, this does not preclude the possibility that some of the amendments may be agreed by these two committees and find their way into the final text of the 5AMLD.

Nature of Proposed Amendments

There are a large number of amendments proposed in the 5AMLD. My summary focuses on those changes that are likely to be the most relevant for financial institutions, so it’s not an exhaustive summary of all the changes proposed. To help wade through the changes, I have identified which amendments were proposed in July 2016 and the further changes proposed in the Compromise Text. I start my summary by highlighting some of EESC’s proposals which address more broadly the 4AMLD’s implementation and the overall fight against financial crime.

As the summary is rather long, you’ll find it here as a downloadable separate document.

Concluding Thoughts

One of the more welcome amendments proposed in the Compromise Text is the return to the original transposition deadline of 26 June 2017 (N.B. the July 2016 proposed amendments included changing the transposition date to 1 January 2017). Nonetheless, the European Parliament has set itself an ambitious deadline to reach agreement on the 5AMLD.    

With countries being encouraged to transpose the 4AMLD as quickly as possible in 2017, these 11th hour proposed changes may come as a bit of “curve ball” to those who have already commenced public consultation on the changes they propose to make to their existing AML/CFT regimes.

But I just can’t help thinking that, rather than investing so much time in further refining, redrafting and redesigning the 4AMLD’s text, maybe we should now be focusing on how the measures proposed in this Directive can be implemented to ensure that they are both appropriate and effective to mitigate financial crime.

And in the absence of an updated impact assessment which considers the possible consequences of these proposed amendments, the risk of unintended consequences seems, to me at least, a real possibility and one that should be considered prior to agreement on the final text of the 4AMLD.

For a copy of the European’s Compromise Text (“5AMLD”) issued on 28 October 2016 See: http://data.consilium.europa.eu/doc/document/ST-13872-2016-INIT/en/pdf

For a copy of the EESC’s Opinion on the 4AMLD See: https://dm.eesc.europa.eu/EESCDocumentSearch/Pages/opinionsresults.aspx?k=(documenttype:AC)%20(documentlanguage:en)%20(documentnumber:4274)%20(documentyear:2016)

To see the Draft Report from the Committee on Economic and Monetary Affairs and the Committee on Civil Liberties, Justice and Home Affairs see: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+COMPARL+PE-593.836+01+DOC+PDF+V0//EN&language=EN