Commission Directive 2006/70/EC of  1 August 2006  laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of  politically exposed person  and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis
Date: 2006-08-01
Institutions: European Commission
Subjects: civil servant, customers, financial institution, financial legislation, money laundering, political figure, terrorism

4.8.2006

EN

Official Journal of the European Union

L 214/29

COMMISSION DIRECTIVE 2006/70/EC

of 1 August 2006

laying down implementing measures for Directive 2005/60/EC of the European Parliament and of
the Council as regards the definition of ‘politically exposed person’ and the technical criteria for
simplified customer due diligence procedures and for exemption on grounds of a financial activity
conducted on an occasional or very limited basis

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Directive by providing the necessary guidance to insti-
tutions and persons in this connection.

Having regard to the Treaty
Community,

establishing the European

Having regard to Directive 2005/60/EC of
the European
Parliament and of the Council of 26 October 2005 on the
prevention of the use of the financial system for the purpose
of money laundering and terrorist financing (1), and in particular
points (a), (b) and (d) of Article 40(1) thereof,

(3)

Public functions exercised at levels lower than national
should normally not be considered prominent. However,
where their political exposure is comparable to that of
institutions and
similar positions at national
persons covered by this Directive should consider, on a
risk-sensitive basis, whether persons exercising those
public functions
should be considered as politically
exposed persons.

level,

Whereas:

(1)

(2)

or

business

relationships with

Directive 2005/60/EC requires institutions and persons
covered to apply, on a risk-sensitive basis, enhanced
customer due diligence measures in respect of
trans-
actions
politically
exposed persons residing in another Member State or
in a third country. In the context of this risk analysis,
it is appropriate for the resources of the institutions and
persons covered to be focused in particular on products
and transactions that are characterised by a high risk of
are
money
understood to be persons entrusted with prominent
public functions,
their immediate family members or
persons known to be close associates of such persons.
In order to provide for a coherent application of the
concept of politically exposed person, when determining
the groups of persons covered, it is essential to take into
consideration
economic
differences between countries concerned.

exposed persons

laundering.

Politically

political

social,

and

the

and

persons

covered

Institutions
by Directive
2005/60/EC may fail to identify a customer as falling
within one of the politically exposed person categories,
despite having taken reasonable and adequate measures
in this regard. In those circumstances, Member States,
when exercising their powers in relation to the appli-
cation of that Directive, should give due consideration
to the need to ensure that those persons do not auto-
matically incur liability for such failure. Member States
should also consider facilitating compliance with that

(1) OJ L 309, 25.11.2005, p. 15.

(4) Where Directive 2005/60/EC requires institutions and
persons covered to identify close associates of natural
entrusted with prominent public
persons who are
functions,
that
the relation with the associate is publicly known or
that
the institution or person has reasons to believe
that such relation exists. Thus it does not presuppose
active research on the part of
the institutions and
persons covered by the Directive.

this requirement applies to the extent

(5)

(6)

Persons falling under the concept of politically exposed
persons should not be considered as such after they have
ceased to exercise prominent public functions, subject to
a minimum period.

the

that

tool

given

normal

the
and

Since the adaptation, on a risk-sensitive basis, of the
general customer due diligence procedures to low-risk
under Directive
situations
is
2005/60/EC,
simplified
fact
customer due diligence procedures
require adequate
checks and balances elsewhere in the system aiming at
preventing money laundering and terrorist financing, the
application
diligence
procedures should be restricted to a limited number of
cases. In these cases, the requirements for institutions and
persons covered by that Directive do not disappear, and
these are expected to, inter alia, conduct ongoing moni-
toring of the business relations, in order to be able to
detect complex or unusually large transactions which
have no apparent economic or visible lawful purpose.

simplified

customer

due

of

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(7)

(8)

(9)

due

diligence

customer

simplified

Domestic public authorities are generally considered as
low-risk customers within their own Member State and,
in accordance with Directive 2005/60/EC, may be subject
to
procedures.
However, none of the Community institutions, bodies,
offices or agencies,
including the European Central
Bank (ECB), directly qualify in the Directive for simplified
the ‘domestic public
customer due diligence under
authority’ category or,
in the case of the ECB, under
institution’ category. However,
the ‘credit and financial
since these entities do not appear to present a high
risk of money laundering or terrorist
they
should be recognised as low-risk customers and benefit
from the simplified customer due diligence procedures
provided that appropriate criteria are fulfilled.

financing,

the definition of

Furthermore,
it should be possible to apply simplified
customer due diligence procedures in the case of legal
entities undertaking financial activities which do not fall
under
institution under
Directive 2005/60/EC but which are subject to national
legislation pursuant to that Directive and comply with
transparency as to
requirements concerning sufficient
their
in
particular enhanced supervision. This could be the case
for undertakings providing general insurance services.

identity and adequate control mechanisms,

financial

It should be possible to apply simplified customer due
diligence procedures to products and related transactions
in limited circumstances, for example where the benefits
of the financial product in question cannot generally be
realised for the benefit of third parties and those benefits
are only realisable in the long term, such as some
investment
insurance policies or savings products, or
where the financial product aims at financing physical
assets in the form of leasing agreements in which the
legal and beneficial title of the underlying asset remains
with the leasing company or in the form of low value
consumer credit, provided the transactions are carried
out through bank accounts and are below an appropriate
threshold. State controlled products which are generally
addressed to specific categories of clients, such as savings
products for the benefit of children, should benefit from
simplified customer due diligence procedures even if not
all
the criteria are fulfilled. State control should be
understood as an activity beyond normal supervision
on financial markets and should not be construed as
covering products,
issued
such as debt
directly by the State.

securities,

(10)

Before allowing use of simplified customer due diligence
procedures, Member States should assess whether the
customers or
the products and related transactions
represent a low-risk of money laundering or terrorist
financing, notably by paying special attention to any
activity of these customers or to any type of products
or transactions which may be regarded as particularly

likely, by their nature, to be used or abused for money
laundering or terrorist financing purposes. In particular,
in relation to low-risk
any attempt by customers
products to act anonymously or hide their
identity
should be considered as a risk factor and as potentially
suspicious.

(11)

In certain circumstances, natural persons or legal entities
may conduct financial activities on an occasional or very
limited basis, as a complement to other non-financial
activities, such as hotels that provide currency exchange
services to their clients. Directive 2005/60/EC allows
Member States to decide that financial activities of that
kind fall outside its scope. The assessment of the occa-
sional or very limited nature of the activity should be
made by reference to quantitative thresholds in relation
the business
to the transactions and the turnover of
should be decided at
concerned. These
national
financial
level, depending on the type of
activity, in order to take account of differences between
countries.

thresholds

(12) Moreover, a person engaging in a financial activity on an
occasional or very limited basis should not provide a full
range of financial services to the public but only those
needed for
its main
improving the performance of
business. When the main business of the person relates
to an activity covered by Directive 2005/60/EC,
the
exemption for occasional or limited financial activities
should not be granted, except in relation to traders in
goods.

(13)

Some financial activities, such as money transmission or
remittance services, are more likely to be used or abused
for money laundering or terrorist financing purposes. It
is therefore necessary to ensure that
these or similar
financial activities are not exempted from the scope of
Directive 2005/60/EC.

(14)

Provision should be made for decisions pursuant
to
Article 2(2) of Directive 2005/60/EC to be withdrawn
as quickly as possible if necessary.

(15) Member States

the

that

should ensure

exemption
decisions are not abused for money laundering or
terrorist financing purposes. They notably should avoid
adopting decisions under Article 2(2) of Directive
2005/60/EC in cases where monitoring or enforcement
activities by national authorities present special diffi-
culties as a result of overlapping competences between
more than one Member State, such as the provision of
financial services on board ships providing transport
services between ports
situated in different Member
States.

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(16)

this Directive is without prejudice
The application of
to the application of Council Regulation (EC) No
2580/2001 of 27 December 2001 on specific restrictive
measures directed against certain persons and entities
with a view to combating terrorism (1) and Council Regu-
lation (EC) No 881/2002 of 27 May 2002 imposing
certain specific
restrictive measures directed against
certain persons and entities associated with Usama bin
Laden,
the Al-Qaida network and the Taliban, and
repealing Council Regulation (EC) No 467/2001 prohi-
biting the export of certain goods and services to Afgha-
nistan, strengthening the flight ban and extending the
freeze of funds and other financial resources in respect
of the Taliban of Afghanistan (2).

(17)

The measures provided for
in this Directive are in
accordance with the opinion of the Committee on the
Prevention of Money Laundering and Terrorist Financing,

HAS ADOPTED THIS DIRECTIVE:

(b) members of parliaments;

(c) members of supreme courts, of constitutional courts or of
judicial bodies whose decisions are not
in exceptional circum-

to further appeal, except

other high-level
subject
stances;

(d) members of courts of auditors or of the boards of central

banks;

(e) ambassadors, chargés d'affaires and high-ranking officers in

the armed forces;

(f) members of the administrative, management or supervisory

bodies of State-owned enterprises.

Article 1

Subject-matter

None of the categories set out in points (a) to (f) of the first
subparagraph shall be understood as covering middle ranking or
more junior officials.

This Directive lays down implementing measures for Directive
2005/60/EC as regards the following:

1. the technical aspects of the definition of politically exposed

persons set out in Article 3(8) of that Directive;

2. technical criteria for assessing whether situations represent a
financing as

low risk of money laundering or
referred to in Article 11(2) and (5) of that Directive;

terrorist

3. technical criteria for assessing whether, in accordance with
Article 2(2) of Directive 2005/60/EC,
it is justified not to
apply that Directive to certain legal or natural persons
carrying out a financial activity on an occasional or very
limited basis.

Article 2

Politically exposed persons

The categories set out in points (a) to (e) of the first subpar-
agraph shall, where applicable, include positions at Community
and international level.

For the purposes of Article 3(8) of Directive 2005/60/EC,

2.
‘immediate family members’ shall include the following:

(a)

the spouse;

(b) any partner considered by national law as equivalent to the

spouse;

(c)

the children and their spouses or partners;

1.
For the purposes of Article 3(8) of Directive 2005/60/EC,
‘natural persons who are or have been entrusted with
prominent public functions’ shall include the following:

(d) the parents.

(a) heads of State, heads of government, ministers and deputy

or assistant ministers;

For the purposes of Article 3(8) of Directive 2005/60/EC,
include the

3.
‘persons known to be close associates’
following:

shall

(1) OJ L 344, 28.12.2001, p. 70. Regulation as last amended by

Decision 2006/379/EC (OJ L 144, 31.5.2006, p. 21).

(2) OJ L 139, 29.5.2002, p. 9. Regulation as

last amended by
Commission Regulation (EC) No 674/2006 (OJ L 116, 29.4.2006,
p. 58).

(a) any natural person who is known to have joint beneficial
ownership of legal entities or legal arrangements, or any
other close business relations, with a person referred to in
paragraph 1;

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(b) any natural person who has sole beneficial ownership of a
legal entity or legal arrangement which is known to have
been set up for the benefit de facto of the person referred to
in paragraph 1.

(c)

is

customer

licensing
to a mandatory
subject
the
law for the undertaking of
requirement under national
the
financial activities and licensing may be refused if
competent authorities are not satisfied that
the persons
who effectively direct or will direct the business of such
an entity, or its beneficial owner, are fit and proper persons;

4. Without prejudice to the application, on a risk-sensitive
basis, of enhanced customer due diligence measures, where a
person has ceased to be entrusted with a prominent public
function within the meaning of paragraph 1 of this Article
for a period of at
institutions and persons
referred to in Article 2(1) of Directive 2005/60/EC shall not
be obliged to consider such a person as politically exposed.

least one year,

Article 3

Simplified customer due diligence

the

For

purposes

of Article

1.
of Directive
2005/60/EC, Member States may, subject to paragraph 4 of
this Article, consider customers who are public authorities or
the following criteria as
public bodies and who fulfil all
customers representing a low risk of money laundering or
terrorist financing:

11(2)

(a)

the customer has been entrusted with public functions
pursuant to the Treaty on European Union, the Treaties
on the Communities or Community secondary legislation;

(b) the customer’s identity is publicly available, transparent and

certain;

(c)

the activities of the customer, as well as its accounting
practices, are transparent;

(d) either the customer is accountable to a Community insti-
tution or to the authorities of a Member State, or appro-
priate check and balance procedures exist ensuring control
of the customer’s activity.

the

For

purposes

of Article

2.
of Directive
2005/60/EC, Member States may, subject to paragraph 4 of
this Article, consider customers who are legal entities which
do not enjoy the status of public authority or public body
but which fulfil all the following criteria as customers repre-
senting a low risk of money laundering or terrorist financing:

11(2)

(a)

the customer is an entity that undertakes financial activities
outside the scope of Article 2 of Directive 2005/60/EC but
to which national legislation has extended the obligations of
that Directive pursuant to Article 4 thereof;

(d) the customer is subject to supervision, within the meaning
of Article 37(3) of Directive 2005/60/EC, by competent
authorities as regards compliance with the national
legis-
lation transposing that Directive and, where applicable, addi-
tional obligations under national legislation;

(e)

failure by the customer to comply with the obligations
referred to in point (a) is subject to effective, proportionate
and dissuasive sanctions including the possibility of appro-
priate administrative measures or the imposition of admin-
istrative sanctions.

Entity, as referred to in point (a) of the first subparagraph, shall
include subsidiaries only in so far as the obligations of Directive
2005/60/EC have been extended to them on their own account.

For the purposes of point (c) of the first subparagraph, the
activity conducted by the customer shall be supervised by
competent authorities. Supervision is to be understood in this
context as meaning the type of supervisory activity with the
the possibility of
highest
conducting on-site inspections. Such inspections shall
include
the review of policies, procedures, books and records, and shall
extend to sample testing.

supervisory powers,

including

the

For

purposes

of Article

of Directive
3.
2005/60/EC, Member States may, subject to paragraph 4 of
this Article, allow the institutions and persons covered by that
Directive to consider products which fulfil all the following
criteria, or transactions related to such products, as representing
a low risk of money laundering or terrorist financing:

11(5)

(a)

the product has a written contractual base;

the customer with a credit

(b) the related transactions are carried out through an account
institution covered by
of
Directive 2005/60/EC or a credit institution situated in a
third country which imposes requirements equivalent
to
those laid down in that Directive;

(b) the identity of the customer is publicly available, transparent

and certain;

(c)

the product or related transactions are not anonymous and
their nature is such that it allows for the timely application
of Article 7(c) of Directive 2005/60/EC;

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(d) the product
threshold;

is

subject

to a predetermined maximum

(e)

the benefits of the product or related transactions cannot be
realised for the benefit of third parties, except in the case of
death, disablement, survival to a predetermined advanced
age, or similar events;

(f)

in the case of products or related transactions allowing for
in financial assets or claims,
the investment of
including insurance or other kind of contingent claims:

funds

(i)

the benefits of the product or related transactions are
only realisable in the long term;

(ii)

the product or related transactions cannot be used as
collateral;

In assessing whether the customers or products and trans-
4.
actions referred to in paragraphs 1, 2 and 3 represent a low risk
of money laundering or terrorist financing, Member States shall
pay special attention to any activity of those customers or to
any type of product or transaction which may be regarded as
particularly likely, by its nature, to be used or abused for money
laundering or terrorist financing purposes.

Member States shall not consider that customers or products
and transactions referred to in paragraphs 1, 2 and 3 represent
a low risk of money laundering or terrorist financing if there is
information available to suggest that the risk of money laun-
dering or terrorist financing may not be low.

Article 4

Financial activity on an occasional or very limited basis

1.
For the purposes of Article 2(2) of Directive 2005/60/EC,
Member States may, subject to paragraph 2 of this Article,
consider legal or natural persons who engage in a financial
activity which fulfils all the following criteria as not falling
within the scope of Article 3(1) or (2) of that Directive:

(iii) during the contractual

relationship, no accelerated
payments are made, no surrender clauses are used
and no early termination takes place.

(a)

the financial activity is limited in absolute terms;

cases

11(5)(a)

established

subparagraph,

For the purposes of point (d) of the first subparagraph, the
thresholds
of Directive
in Article
2005/60/EC shall apply in the case of insurance policies or
savings products of similar nature. Without prejudice to the
third
the maximum
in the other
threshold shall be EUR 15 000. Member States may derogate
from that threshold in the case of products which are related to
the financing of physical assets and where the legal and bene-
ficial title of the assets is not transferred to the customer until
termination of the contractual relationship, provided that the
threshold established by the Member State for the transactions
related to this type of product, whether the transaction is
carried out
in a single operation or in several operations
which appear to be linked, does not exceed EUR 15 000 per
year.

(b) the financial activity is limited on a transaction basis;

(c)

the financial activity is not the main activity;

(d) the financial activity is ancillary and directly related to the

main activity;

(e) with the exception of the activity referred to in point (3)(e)
of Article 2(1) of Directive 2005/60/EC, the main activity is
not an activity mentioned in Article 2(1) of that Directive;

Member States may derogate from the criteria set out in points
(e) and (f) of the first subparagraph in the case of products the
relevant
characteristics of which are determined by their
domestic public authorities for purposes of general
interest,
which benefit from specific advantages from the State in the
form of direct grants or tax rebates, and the use of which is
subject
the
benefits of the product are realisable only in the long term
and that the threshold established for the purposes of point
(d) of the first subparagraph is sufficiently low. Where appro-
priate, that threshold may be set as a maximum annual amount.

to control by those authorities, provided that

(f)

the financial activity is provided only to the customers of
the main activity and is not generally offered to the public.

For the purposes of point (a) of the first subparagraph, the total
turnover of the financial activity may not exceed a threshold
which must be sufficiently low. That threshold shall be estab-
lished at national
financial
activity.

level, depending on the type of

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For the purposes of point (b) of the first subparagraph, Member
States shall apply a maximum threshold per customer and
single transaction, whether the transaction is carried out in a
single operation or in several operations which appear to be
level,
linked. That
depending on the type of financial activity. It shall be suffi-
ciently low in order to ensure that the types of transactions
in question are an impractical and inefficient method for laun-
dering money or for terrorist financing, and shall not exceed
EUR 1 000.

threshold shall be established at national

Article 5

Transposition

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 15 December 2007 at
the latest. They shall
forthwith communicate to the Commission the text of those
provisions and a correlation table between those provisions and
this Directive.

For the purposes of point (c) of the first subparagraph, Member
States shall require that the turnover of the financial activity
the legal or
the total
does not exceed 5 % of
natural person concerned.

turnover of

When Member States adopt those provisions, they shall contain
a reference to this Directive or be accompanied by such a
reference on the occasion of their official publication. Member
States shall determine how such reference is to be made.

In assessing the risk of money laundering or terrorist
2.
the purposes of Article 2(2) of
financing occurring for
Directive 2005/60/EC, Member
special
attention to any financial activity which is regarded as parti-
cularly likely, by its nature, to be used or abused for money
laundering or terrorist financing purposes.

shall pay

States

Member States shall not consider that the financial activities
referred to in paragraph 1 represent a low risk of money laun-
dering or terrorist financing if there is information available to
suggest that the risk of money laundering or terrorist financing
may not be low.

Any decision pursuant

to Article 2(2) of Directive
3.
is based.
2005/60/EC shall state the reasons on which it
Member States shall provide for the possibility of withdrawing
that decision should circumstances change.

shall

establish risk-based monitoring
4. Member States
activities or take any other adequate measures to ensure that
the exemption granted by decisions pursuant to Article 2(2) of
Directive 2005/60/EC is not abused by possible money laun-
derers or financers of terrorism.

2. Member States shall communicate to the Commission the
text of the main provisions of national law which they adopt in
the field covered by this Directive.

Article 6

This Directive shall enter into force on the 20th day following
its publication in the Official Journal of the European Union.

Article 7

This Directive is addressed to the Member States.

Done at Brussels, 1 August 2006.

For the Commission

Charlie McCREEVY
Member of the Commission