How can we ensure that all players are subject to the same anti-money laundering and counter-terrorist financing requirements, regardless of their location? In the EU, the answer comes in the form of the AML package agreed by the 27 member states this spring. It is a voluminous package, including the , the Sixth AML Directive and the AML Regulation (AMLR).
Long-awaited, the AMLR will apply from mid-2027 (except for the football agents and professional football clubs concerned, for whom it will apply from mid-2029). When it was being drafted, the text caused . The package introduces an entirely new logic, with the anti-money laundering directives being replaced by a regulation directly applicable in all member states, without the need for transposition into national law.
Luxembourg among the first
"Naturally, this leads to an increase in the volume of regulation, as everything has to be spelled out exhaustively to avoid ambiguities," stresses Arendt & Medernach partner . "Nevertheless, on closer examination, many elements are not completely new. There are adjustments, additional nuances, and here and there a few new obligations, but we cannot yet speak of a general strengthening of the existing rules.”
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Many players will therefore not see their daily lives change radically, according to Meyer: "Luxembourg was among the first to apply vigilance measures. It has always adopted a more conservative approach in the fight against money laundering, closely aligning its rules with the recommendations of the Financial Action Task Force (FATF)."
Overly restrictive rules can be a waste of resources.
From Arendt's perspective, the EU's agreement on AML reaffirms the importance of realistic and effective regulation. "In this area, legislation has always taken a risk-based approach, avoiding potentially counter-productive measures. Like a fishing net with meshes that are too tight, overly restrictive rules can prove ineffective, wasting time and resources on analyses that bear no real relation to the underlying risk of money laundering or terrorist financing", warned Meyer.
Among the fears that have not materialised, the lawyer cites the 25% rule for identifying beneficial owners: "If someone behind your client holds more than 25% of the shares or voting rights, you have to identify them. The European Parliament considered lowering this threshold to 15%, which would have had a considerable impact on all players, but the 25% threshold was ultimately retained." However, a reduction to 15% is still envisaged for categories of legal entities exposed to higher risks, following a decision-making process between the member states and European Commission.
“Surprising” new features
The Luxembourg Bankers’ Association (ABBL) feared an overly prescriptive approach to the banker's duty of care. Here again, Meyer has not observed any radical changes compared with existing practices. "But of course, even if the regulation contains no major surprises, the devil is in the detail", he said. "On this point, we'll have to wait for further details from the AML (Amla) authority.
Among the "surprising" new features, according to Arendt: the monitoring of targeted financial sanctions (e.g., EU and UN sanctions lists), traditionally dealt with by a separate law, is now included among customer due diligence measures. The consequence is that failure to do so will result in non-compliance with anti-money laundering rules.
Without exception, all investment funds are directly subject to the text.
Manfred Hoffmann, counsel in the investment management department at Arendt & Medernach, has analysed the impact of the new regulations on funds. The first change is that all investment funds without exception, including funds without legal personality such as unit trusts, are now directly subject to the text. This also includes unregulated funds, which represent a significant percentage of the fund industry. Although non-regulated funds under Luxembourg law, in particular reserved alternative investment funds (RAIFs), are already subject to the anti-money laundering provisions, in future they will have requirements identical to those of regulated investment funds.
The issue of intermediaries
On several crucial points, however, the fund industry is awaiting clarification from the supervisory authorities. In particular, the question is whether an intermediary, i.e. an investor who buys fund units in his own name but on behalf of his clients, is considered to be a nominee.
If so, they are obliged not only to identify and verify the identity of each client individually, but also to pass on this information, along with their status, to the legal entity for which they are acting as shareholder or unit-holder. The legal entities must then enter this information in the central registers. "I am confident that this will not be the case for most intermediary investors. It would be difficult to apply in practice," said Hoffmann.
Another point awaiting clarification: the regulation stipulates that legal entities created outside the EU will have to register information on beneficial owners in European central registers when they enter into a business relationship with a reporting entity and either of them is associated with sectors with a medium or high risk of money laundering and terrorist financing. "This approach could have a significant impact on current practice and is extraterritorial in nature", observed Hoffmann, who is concerned that it could dissuade entities outside the EU from doing business with entities subject to the AMLR that are not subject to such obligations.
The regime is not necessarily tougher than before, but it has become more sophisticated.
What are the penalties for breaching the new rules? "The regime is not necessarily tougher than before, but it has become more sophisticated", explains , a partner at Arendt Regulatory & Consulting. The amount of the penalty will take account of the seriousness of the infringement, its repetitive nature, the number of entities involved, the type of breach, its recurrence at the level of other entities and the measures implemented to correct it.
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Thus, the maximum amount of the financial penalty that can be imposed by the national authorities on credit or financial institutions can now reach €10m or 10% of total annual turnover, whichever is higher. By comparison, Luxembourg law currently provides for a maximum amount of €5m or 10% of total annual turnover in the case of a legal entity, where the professional concerned is a credit or financial institution.
While the sanctions aspect is important for the obliged entities, it should also be emphasised, according to Périot, that "the changes made by the AMLR also have an impact on the supervisory authorities in each member state, since the latter, which were previously autonomous, now come under the direct supervision of Amla".
Read the original French version of this article