The European Commission released an Action Plan last week to "strengthen the fight against the financing of terrorism".
It centres on the concept of disruption. The aim of the Action Plan is to seek to cut off financial flows to terrorists while protecting the legitimate payments industry and European financial markets.
With the constant emergence of new technologies and virtual currencies, opportunistic terrorists and criminals are staying one step ahead of the game.
In order to address these concerns the Commission proposed a Directive on "combatting terrorism" in December 2015 which includes measures to criminalise terrorist financing. In the interim, while that proposal undergoes the usual legislative review, the Commission has proposed amendments to the Fourth Anti-Money Laundering Directive ("MLD4"). The Commission has also announced proposals to bring forward the implementation date for MLD4 by 6 months, to Q4 2016.
One of the proposed amendments to MLD4 is to bring virtual currency exchange platforms under the scope of AML legislation. Platforms would have to apply customer due diligence controls. This would effectively put an end to the anonymity associated with virtual currencies.
The Commission intends to update the MLD4 to address targeted issues:
- "Establish harmonised and enhanced due diligence measures for high risk third countries;
- Tackle the risks of virtual currency exchange platforms and pre-paid instruments;
- Propose centralised bank and payment account registers or electronic data retrieval systems for Member States;
- Improve access to information and exchange of information for Financial Intelligence Units; and
- Boost information sharing between Member States, the Commission and economic operators on how to implement restrictive measures such as UN sanctions."
Firms should consider how the proposed amendments to MLD4 might impact their business, in particular those in the virtual currency and crypto currency sphere.
Leman Solicitors advises regulated entities on their obligations pursuant to the Money Laundering obligations, Regulatory and Compliance codes. Speak to our specialist financial services team to find out how we can help you.
Contact Ronan McGoldrick or Laura Daly for further information.
Terrorists are involved in a variety of both licit and illicit activities to finance terrorist acts. Tracking financial flows can help to identify and pursue terrorist networks. New financial tools and payment modes create new vulnerabilities that need to be addressed.