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Agreement Reached On Revised EU Money Laundering Directive

by Ulrika Lomas, for LawAndTax-News.com, Brussels

10 December 2004


In a statement released following Tuesday's ECOFIN meeting of EU finance ministers, the Dutch Presidency announced that agreement had been reached regarding amendments to the Union's anti-money laundering and terrorist financing legislation.

The changes were deemed necessary in order to keep pace with the revised guidelines issued by the Financial Action Task Force (FATF).

The Dutch statement revealed that the key amendments to the existing directive were:

  • The reporting obligation of relevant institutions that are affected by the directive has been extended to transactions that may indicate terrorism financing;
  • Financial institutions will be obliged to identify the beneficial owner of a business relation or transaction in order to prevent people from hiding behind certain legal facades;
  • A risk based approach will be introduced, whereby institutions that are affected by the directive, have to assess for themselves, based on a risk analysis, to what extent the measures in the field of client identification have to be carried out. This because the risk always depends upon the characteristics of the specific client and the product that the client is purchasing;
  • Whereas the initial directive was aimed at specific risk groups, now all traders that accept cash payments of €15,000 or more will be affected by the directive and the identification and reporting obligation. This ensures that the high risk of the use of cash for money laundering is taken into account; and
  • Each member state will be obliged to supervise the compliance of the measures by the affected institutions effectively.

However, following the announcement that agreement on the matter had been reached, the UK's Law Society and the Council of the Bars and Law Societies of the European Union (CCBE) revealed that they will be pushing for certain parts of the new legislation to be reformed.

According to reports in the legal media, the two bodies expressed concern with regard to a provision preventing lawyers from informing a client that they have been reported for suspected money laundering, and asked that the concept of legal privilege be taken into account.

They also reportedly took issue with the lack of mutual recognition in the amended directive, which they argued may lead to duplication of paperwork for UK law firms with European operations.

A comprehensive report in our Intelligence Report series examining offshore confidentiality is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report1.asp

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