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Clarity is required on Simplified Due Diligence (SDD) with more examples. There is a worry that SDD could be seen by some as an exemption from Anti-Money Laundering (AML) requirements which it clearly is not.
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Politically Exposed Persons (PEPs) – the FATF recommendation was that domestic PEPs are considered which is not what the 3rd Directive had said. A suggestion was made that there should be risk assessments for PEPs with domestic PEPs being lower risk. The 3rd Directive required that where a firm accepts a PEP it should be done by firms senior management. Clarification is required as to who this should be and what level in the firm. There is the feeling at the present time that PEPs are being accepted by too junior staff.
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The 3rd Directive required the EU to present a report to the European Parliament on the consequences of reducing the limits on beneficial ownership from 25% to 20%. The study concluded that lowering the threshold would not bring significant advantages and would increase costs but the Commission will need to consider this.
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It was argued that although someone may own 25% of the shares of a company, they may not control it, there may be people within a company who neither own shares or are a director, but are controlling it. These are currently being excluded from identification and need to be reviewed.
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The absence of public information about beneficial owners was cited by many as one of the main problems to fully adhering to the 3rd Directive. The Commission are to consider either in the 4th Directive, or another legal instrument, measures to promote the transparency of legal persons and arrangements.
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The 3rd Directive calls for suspicions to be reported promptly. However, Financial Intelligence Units have been criticised for their lack of feedback in relation to reports. Consideration is to be given on how this can be improved across the EU.
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Third Country Equivalence – the 3rd Directive allows lighter Customer Due Diligence measures to be applied in the case of Financial Institutions situated in EU/EEA countries. However it is time consuming to prepare the equivalent lists and given the FAFT lists, the EU is considering whether such lists are still needed. The 3rd Directive allowed for a Black List of countries, but this has never been used, therefore the provision may be removed.
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A criticism of the 3rd Directive was that there needs to be better interaction between AML and personal data protection obligations. It is felt that a lot of information which could be shared is currently not for fear of breaching personal data requirements. Consideration is to be given on how personal data should be handled in order to enable effective Anti-Money Laundering/ Counter Terrorism Financing compliance whilst respecting fundamental rights.
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Legal Privilege – It was noted that Privilege can create anxiety within the legal profession as it can violate the lawyers obligation of professional secrecy and the right to a fair trial. It was noted that the European Court of Justice has ruled on this issue in 2007 that the AML obligations imposed on the legal profession do not infringe the right to a fair trial. It was noted that the exemption applies mainly on a transactional basis rather than on a link to judicial proceedings. However it was noted that the guidance can be unclear and would benefit from further clarification.