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4th EU Anti Money Laundering Directive & Non-Financial Institutions

CubeIQ Limited
Published by in Risk & Compliance ·
Tags: AMLPEPComplianceEU4thAMLDirective

Although Anti Money Laundering laws and regulations primary consider financial institutions for several years has been misconceived that companies and organizations out of the financial industry should not be concerned with AML activities.
Money Laundering Directive EU/2015/849 (MLD4) and the recent updates of U.S. Department of Treasury, Office of Foreign Assets Control, come to clear this misunderstanding.

Fourth Directive has increased the requirement for certain bodies to implement Customer Due Diligence - CDD. The gambling sector and high value goods traders are now included, as well as the majority of the company categories and natural persons in the following list except the last two categories which CDD is required to be performed only when certain services are provided (services lists 17,a-e and 18,a-e).

CDD Obliged Entities for Non-Financial institutions Company Categories
  1. Brokers/Dealers in commodities
  2. Brokers/Dealers in precious metals, stones and jewels
  3. Operators of Credit Card Systems
  4. Operators of Payment  Transaction Services, Payment Processors, Merchant Acquiring Services
  5. Chartered Accountants
  6. Audit Firms
  7. Independent Accountants
  8. Private Auditors
  9. Tax consultants and tax consulting firms
  10. Real estate agents and related firms
  11. Gambling Companies including:
    1. Casino enterprises and Card Clubs
    2. Casinos operating on ships flying the Member State flag.
    3. Public or private sector enterprises, organizations and other bodies that organize and/or conduct gambling and related agencies and agents.
  12. Auction houses
  13. Dealers in high-value goods, only to the extent that payments are made in cash in an amount of EUR 10,000 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked.
  14. Auctioneers
  15. Pawnbrokers
  16. Armored Cars Operators (CIT Companies)
  17. Notaries and other independent legal professionals, when they participate, whether by acting on behalf of and for their clients in any financial or real estate transaction, or by assisting in the planning and execution of transactions for the client concerning the:
    1. Buying and selling of real property or business entities
    2. Managing of client money, securities or other assets
    3. Opening or management of bank, savings or securities accounts
    4. Organization of contributions necessary for the creation, operation or management of companies
    5. Creation, operation or management of trusts, companies or similar structures.
  18. Natural or legal persons or independent legal professionals providing services to companies and trusts (trust and company service providers) which by way of business provide any of the following services to third parties:
    1. Forming companies or other legal persons
    2. Acting as or arranging for another person to act as a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons or arrangements
    3. Providing a registered office, business address, correspondence or administrative address and any other related services for a company, a partnership or any other legal person or arrangement
    4. Acting as or arranging for another person to act as a trustee of an express trust or a similar legal arrangement
    5. Acting as or arranging for another person to act as a nominee shareholder for another person other than a company listed on a regulated market that is subject to disclosure requirements in conformity with Community legislation or subject to equivalent international standards.

Implementation of an AML/CDD Program must be in writing and must include:
  • Development of internal policies, procedures, and controls, proportionate to the nature and size of the obliged entity and approved from her senior management.
  • Designation of a compliance officer
  • Ongoing employee training program and
  • Independent audit function to test programs.

Fourth Directive enables Obliged Entities to adapt their measures to low risk situations. Before applying the simplified measures, OE must be sure the business relationship or transaction presents a lower degree risk. In doing this they must consult the lower risk situations set out in Annex II [Article 16].

Minimum and basic CDD measure, regardless of the risk degree (low, medium, high), is filtering customer’s name/title and personal/company details against the international Sanctioned Designated Nationals – SDN List such as OFAC SDN & Blocked Persons List, EU Consolidated List, UN Consolidated List, FATF NCCT List, FAFT AML/CFT List and other. Names filtering will prevent an obliged entity of having as customers and/or doing business with persons/companies which are debarred and sanctioned due to their involvement in money laundering, financing terrorism, narcotics trafficking, weapons of mass destruction proliferation and other threats to the national security, foreign policy or economy of European Union and cooperating countries such as United States.

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