As I announced last Friday, we will begin our “AMLD4 & AMLD5” series by talking about the entities covered by the legislation.
Our starting point will be Article 2 of the 4th Directive (AMLD4), to which we will add Article 1, 8° of the 5th Directive (AMLD5). If you wish to read the official text, here are the links to the 4th Directive and the 5th Directive.
The first category targeted is credit and financial institutions. It is this type of establishment that is in the front line. Conventional banks have not waited for AMLD4 or AMLD5 to address money laundering issues.
On the other hand, the entire FinTech sector, including the world of crypto-currencies, seems to me to be much less receptive to anti-money laundering issues. However, this sector is completely included in the AML problem, as specified in the 5th Directive in Article 1, 1, c.
We, at Ibakus, have been regularly interviewed by this type of stakeholder for almost a year now. In order to meet their requests, we have developed an API allowing an interface between the FinTech business application and Ibakus.kyc, in order to certify the quality of FinTech’s customers. However, the API does not exempt the user from exercising his critical sense in front of any transaction.
The second target category, related to the number: auditors, external accountants and tax advisors. It should also be noted that for the last category, the 5th Directive gives a layer with its article 1, 1, 1, 1, a.
All providers of services to companies and trusts can be included in this category. It is not uncommon to meet, for example, professional “Incorporators” who claim to be able to create companies anywhere in the world. These entities fall within the scope of AMLD4 & AMLD5 for their activity on the territory of the European Union. I am also thinking of these new websites that are flourishing and that specialize in connecting companies or investors. This is an area that must be approached with the greatest caution because this sector, where margolines of all kinds abound, is obviously not regulated and does nothing to clean up.
The third category targeted is that of the legal professions: lawyers, notaries, legal advisors, etc. Be careful, there is a size accuracy. These professions are targeted only when they are involved in purchase/sale of securities/real estate or related to the creation/management of a company.
This rule therefore excludes cases where a lawyer intervenes to defend a client in a dispute.
Fourth category, real estate agents. This category is already mentioned in WDMA4 and pointed out again in WDMA5, in Article 1, 1, 1, 1, b. This is quite oddly a professional category that we hear little about when we know that real estate is a very frequent way of laundering significant amounts of money.
I refer you to my blog in June where I mentioned the annual report of the French Sanctions Commission, which cited real estate agencies as the most sanctioned activity in 2017.
Fifth category, all merchants receiving cash payments for more than €10,000. In everyday life, this is a measure that is already well established, especially since some States have lowered this threshold to €3,000 or even €1,000.
Sub-category: the art sector. Even if in the context of AMLD4, the sector was covered, AMLD5 again provides a layer by citing this activity verbatim in Article 1, 1, 1, 1, c.
In the art sector, particular attention must be paid to the valuation of the works exchanged. Frequently, there have been blatant overvaluations that have in fact masked criminal transactions.
For the sake of completeness, I will end this list by quoting the gambling sector.
So here we are at the end of this article 2. But before I conclude, I will add a category of my growth, often forgotten: that of ordinary transactions that are over- or undervalued or that have simply not taken place. False invoices”, another interesting subject to be addressed in the future.
See you next week to discuss customer identification. A lot of joy in prospect.