We stress that the rules on identifying customers’ beneficial owners have to be calibrated correctly and fit well within customer due diligence processes.
The European Parliament and Council are currently finalising their views on the European Commission’s anti-money laundering (AML) package proposal. In addition to the much publicized debate around the location of the new AML Authority, there are even more important elements being discussed which aim to curb money laundering and counter the financing of terrorism (CFT).
In our recent position paper, we stress that the rules on identifying customers’ beneficial owners have to be calibrated correctly and fit well within customer due diligence processes. For instance, the threshold for identifying beneficial owners should be kept at 25% across all industries in which customers operate. Lower levels or separate thresholds for certain industries would overcomplicate identification and lead to unnecessary investigations of minority shareholders. This could lead to financial entities losing sight of complex ownership structures.
Similarly, the ‘control exercised via other means’ criteria needs to be clear, workable and enforceable for practitioners. Overcomplication could lead to inconsistent interpretations of these rules across the EU, making it harder for financial entities to assess their customer relationships and AML/CFT risks.
EFAMA emphasizes that additional rules for collective investments will not result in further clarity on their investors’ beneficial owners. Units or shares in investment funds are often distributed through intermediaries (such as banks) under account structures akin to nominee arrangements, which do not give fund managers a view of the end investors but are already subject to appropriate and specific AML/CFT rules. These structures have long been recognised and accepted by the Financial Action Task Force (FATF), the global standard setter in the AML/CFT area. As such, they should also be excluded from the provisions on nominee arrangements within the AML Package.
EFAMA
© EFAMA - European Fund and Asset Management Association
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