- Directive (EU) 2018/843, published on 19 June, amends the fourth anti-money-laundering directive and enters into force on 9 July.
- It subjects virtual currency exchange platforms and wallet providers to customer due diligence.
- It strengthens beneficial ownership registers; member states must transpose it by 10 January 2020.
On 19 June 2018 the Official Journal of the European Union published Directive (EU) 2018/843, the so-called fifth directive against money laundering and terrorist financing, which amends the fourth. It will enter into force on 9 July 2018 and member states must incorporate it into national law by 10 January 2020.
The directive introduces two major changes. The first is extending the scope to virtual currency exchange platforms and custodian wallet providers. The second is strengthening transparency about who is behind companies and other structures, through beneficial ownership registers.
What changes for cryptocurrencies
Until now, platforms that allow cryptocurrencies to be exchanged for conventional money, or that hold clients’ keys, operated in a lightly regulated area as regards money laundering. Under the new directive they become obliged entities: they must identify their clients, check the origin of funds where appropriate, monitor transactions and report suspicious ones.
Financial intelligence units will also be able to link virtual currency addresses to the identity of their holders. The aim is to reduce the anonymity that hampers investigation of criminal use. For ordinary users, the change means platforms will ask for more data and documentation when opening an account or carrying out transactions. These obligations are already usual in banks and other financial institutions: the aim is to apply to a new type of operator controls that have existed for years in the traditional financial system.
Beneficial ownership registers
The second major novelty concerns information on who ultimately controls a company or a trust. The directive requires each state to have central registers of beneficial owners, both of companies and of similar structures. For companies, access will be public, with certain privacy safeguards; for trusts, for those who show a legitimate interest. The directive also provides for greater cooperation between the financial intelligence units of the different member states, so that information on suspicious transactions flows more easily within the Union.
In Spain, the Commercial Register already includes this year a beneficial-owner form with the filing of accounts, but the directive will require fuller and more accessible regulation. For companies and family groups, it means that information about who controls them will be more visible and must be kept up to date. Publishing the registers raises privacy questions, and the directive tries to balance this with exceptions for risk cases, such as minors or people in vulnerable situations.
What to review
Companies should check that their beneficial ownership information is correct and documented: direct and indirect shareholders, percentages and, where relevant, other means of control. Where there are multi-tier structures, it is worth preparing a chart and keeping the supporting documentation.
Those who deal with cryptocurrency platforms should expect stricter controls and have their identification data ready. This information is general and is not a recommendation on crypto-assets or legal advice; for your case, consult your adviser. If the company uses cryptocurrency platforms to receive or make payments to customers or suppliers, it is advisable to keep traceability of the transactions and the counterparty’s details, because they may be requested by the bank or the platform.
More transparency in structures and payments requires having the data in order.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
