Several key amendments have been proposed for the EU's Fourth Money Laundering Directive, which will have an effect on payment service providers and users. What are the main changes?

The EU's Fourth Money Laundering Directive (MLD4) was introduced in 2015 and is due to be implemented into national law by EU member states in January 2017 (as opposed to the date originally set of 26 June 2017). As well as the change of date, determined in a proposal by the European Commission in July this year, there were also several other amendments to the directive. An article published in the September issue of the European Payments Council (EPC) newsletter has set out some of the main changes introduced by MLD4.

MLD4 replaces the Third Money Laundering Directive (MLD3) and the main changes for payment service providers are that they will need to:

• formally assess and document the money laundering and terrorist financing risks that their businesses face;
• make their documented risk assessments available to national competent authorities and must keep them up to date;
• formally adopt policies and procedures to mitigate the risks presented, which must be approved by senior management;
• under MLD4, more companies will have to carry out customer due diligence, whereas there were certain exemptions for a large number of companies under MLD3;
• there are also more stringent rules for e-money, such as prepaid cards.

Changes to MLD4 proposed in July 2016

In July, the Commission published further amendments to the yet-to-be-implemented MLD4. The EPC authors summarise the amendments as follow:

• Designating virtual currency exchange platforms as "obliged entities" under MLD4 meaning these entities will need to apply CDD when switching virtual for real currencies.
• Lowering the thresholds (from EUR 250 to 150) for non-reloadable prepaid payment instruments to which CDD measures must be applied and removing the CDD exemption for online use of prepaid cards. In addition, anonymous prepaid cards issued outside the EU can only be used in the EU where they can be shown to comply with requirements equivalent to the ones in MLD4.
• Enabling Financial Intelligence Units within each Member State to request information on money laundering and terrorist financing from firms regardless of whether a suspicious transaction report has been made.
• Requiring Member States to set up centralised registries of the identities of holders of bank and payment accounts, or a centralised means of retrieving such data.
• Standardising EDD measures for dealing with natural or legal entities in high risk third countries.
• Requiring Member States to ensure compulsory disclosure of certain beneficial ownership information for companies engaged in profit making activities.
• Excluding closed-loop cards from the definition of E-money.

---

CTMfile take: For more information on the 4th EU Money Laundering Directive, read this useful guide.