By Simon Thompson, VP Northern Europe JAGGAER
The final elements of an ambitious package of legislative proposals aimed at delivering stronger and more consistent AML/CFT rules at the EU level have now been agreed upon by co-legislators. Regulation (EU) 2024/1620 of the European Parliament and of the Council of 31 May 2024 establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism and amending Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010, replaces all previous national rules and entered into force on 26 June 2024. Unlike previous legislation, however, it does not only propose more stringent regulations, but actually broadens the spectrum of affected industries to new sectors.
Crypto, real estate, traders of luxury goods, and professional football clubs are in fact now under new scrutiny with compliance requiring ongoing reviews of existing AML/CFT programmes and frameworks. In addition to this, professional football clubs and agents must apply due diligence obligations in certain cases and report suspicious transactions to a newly appointed monitoring body. In this particular sector, however, a special extended transition period to 2029 has been agreed.
The new regulation also established a European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), based in Frankfurt with direct and indirect supervisory powers over high-risk obliged entities in the financial sector.
The AMLA Regulation specifically sets tighter due diligence requirements, regulates beneficial ownership and sets a limit of € 10,000 to cash payments without identification and proof of the money’s origin. Merchants too are now obliged to keep a record of the information received. Traders of luxury goods such as luxury cars, airplanes and yachts; jewellers and goldsmiths; and precious metals and stones will thus have to be prepared to meet these new auditing and traceability requirements. Special provisions are introduced where transactions involve the sale of jewellery, gold, clocks, and watches when the cost exceeds € 10,000, as well as motor vehicles priced over € 250,000, and planes and boats priced over € 7,500,000 and more. In the case of so-called ultra-rich individuals (those with a net worth ≥ € 50 million), the enhanced due diligence obligations apply directly.
The crypto sector specifically offers an interesting example as the AML Regulation prohibits the provision and custody of anonymous crypto-asset accounts or accounts allowing for the anonymisation or increased obfuscation of transactions by crypto-asset service providers, including those using anonymity-enhancing coins, with the objective of preventing their illicit use. Like luxury goods merchants, these asset service providers and those involved in crypto-asset transfers will have to collect and make accessible data on the originators and beneficiaries of the transfers of virtual or crypto assets they operate, increasing their reporting obligations.
Businesses in a range of sectors will therefore be obliged to run more thorough customer checks, implement stricter internal policies and reporting requirements, or risk fines, potentially amounting to up to 10% of their annual turnover. Given the risks of non-compliance, businesses will need to introduce new solutions to help them manage transparency without overburdening staff with lengthy manual data entry that also may put sensitive data at risk.
To ensure that all legal obligations are met and reporting is carried out correctly, businesses will need to reassess their procurement systems ensuring that they provide a suitable level of automation. This can support businesses by relieving staff as well as buyers and suppliers of lengthy manual data entry but can also prove of critical importance to help flag potentially critical transactions, individuals, or entities that need more detailed attention from specialised staff.
Leveraging technology to improve transparency and make processes more efficient is no longer a nice to have but a legal requirement to avoid hefty fines. Being able to clearly identify and source assets that are now under special scrutiny will become an increasingly important way of de-risking operations for businesses that want to ensure their operations remain competitive, legitimate and profitable over time. Procurement solutions are available to help support better governance by facilitating continuous monitoring across a range of indicators that go even beyond those required by this new regulation. In today’s constantly changing landscape, embracing transparency solutions for the entire supply chain is not a choice, but a necessity.
