The “Report on the legal and regulatory provisions and supervisory expectations across
EU Member States of Simplified Due Diligence requirements where the customers are credit and financial institutions” provides an overview of EU Member States’ legal and regulatory provisions and supervisory expectations in relation to the application of Simplified Due Diligence (SDD) requirements of the 3MLD. The report focuses exclusively on one particular situation of low risk where SDD is applicable, namely where the customer is a credit or financial institution situated in a EU/EEA state or in a country that imposes equivalent AML/CFT requirements.
Background and methodology
1. This paper provides an overview of EU Member States‟ legal and regulatory provisions and supervisory expectations in relation to the application of the Third Money Laundering Directive (3 rd MLD)‟s beneficial ownership Customer Due Diligence (CDD) requirements.
2. The 3 rd MLD is a minimum harmonisation directive. This means that Member States in their transposition of this Directive may go beyond the minimum standards set out in this Directive. Accordingly, the Directive allows for differences in the national transposition of the Directive‟s requirements. Furthermore, the 3 rd MLD introduces a risk-based approach and thus, the extent of measures applied by institutions may depend on the type of customer, business relationship, product or transaction. It is important that these national differences do not create any gaps which have the potential to be exploited for money laundering and terrorist financing purposes.
3. The data for this paper was obtained from financial services supervisors who are members of the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority, collectively known as the European Supervisory Authorities. National supervisors submitted replies to a questionnaire and discussed the issues in the Joint Committee of the European Supervisory Authorities‟ Sub Committee on Anti Money Laundering (AML Committee). The AML Committee‟s findings and conclusions are reflected in this paper.
4. This paper analyses EU Member States‟ current legal, regulatory and supervisory implementation of the anti-money laundering/counter terrorist financing (AML/CTF) frameworks in relation to the application by institutions of CDD measures on their customers‟ beneficial owners. It is not a transposition check of EU Directives. Further, this paper does not take into consideration the on-going discussion at the FATF on the revision of the FATF‟s 40+9 Recommendations.
5. In Chapter 2, this paper provides some background on the AML Committee and the work it has performed in relation to the analysis of certain requirements in the 3 rd MLD. Chapter 3 consists of five sections: Section 1 discusses Member States‟ and national supervisors‟ approaches to credit and financial institutions‟ use of the 25% threshold to identify the “ultimate beneficial owner”; Section 2 describes the national transposition of the Directive‟s requirement to “establish the customer‟s control and ownership structure”; Section 3 describes Member States‟ practices in relation to situations requiring the application of enhanced due diligence; Section 4 discusses record-keeping requirements and Section 5 contains an overview of how institutions use the information on ultimate beneficial owners. An Annex in Chapter 4 maps different types and categories of legal arrangements and entities that exist in Member States and contains country-specific information on the extent to which it is possible to share
information on beneficial owners with foreign regulators and other financial institutions.
Detailed report link: here