COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the prevention of the use of the financial system for the purpose of money laundering, including terrorist financing and Proposal for a Regulation of the European Parliament and of the Council on information accompanying transfers of funds
Date: 2013-02-05
Institutions: European Commission
Subjects: capital transfer, coordination of EMU policies, exchange of information, fight against crime, money laundering, terrorism

EUROPEAN 
COMMISSION 

Strasbourg, 5.2.2013  
SWD(2013) 21 final 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council on the 
prevention of the use of the financial system for the purpose of money laundering, 
including terrorist financing  

and  

Proposal for a Regulation of the European Parliament and of the Council on 
information accompanying transfers of funds 

{COM(2013) 44 final} 
{COM(2013) 45 final} 
{SWD(2013) 22 final}

EN 

   EN 

 
 
 
 
 
  
 
 
 
COMMISSION STAFF WORKING DOCUMENT 

Accompanying the documents  

Proposal for a Directive of the European Parliament and of the Council on the 
prevention of the use of the financial system for the purpose of money laundering, 
including terrorist financing 

and 

Proposal for a Regulation of the European Parliament and of the Council on 
information accompanying transfer of funds 

Contents 
I. 

Introduction ........................................................................................................................... 5 

II. 

Procedural Issues and Consultation of Interested Parties................................................. 6 

II.1. 

Procedural issues ..................................................................................................................... 6 

II.2. 

External expertise and consultation of interested parties ........................................................ 6 

Box 1:  Results of the Commission's public consultation ................................................................ 8 

III. 

Policy context, Problem definition and Subsidiarity.......................................................... 8 

III.1. 

Background and context .......................................................................................................... 8 

III.1.1.  The nature of the problem of Money Laundering and Terrorist Financing............................. 8 

III.1.2.  Nature and size of the market concerned................................................................................. 9 

III.1.3.  Main stakeholders affected by Money Laundering and Terrorist Financing .......................... 9 

III.1.4. 

Impact of Money Laundering and Terrorist Financing ......................................................... 10 

III.2. 

Overview of legislative framework ....................................................................................... 11 

Box 2:  Overview of the main legal instruments in the field of AML/CFT................................... 11 

III.3. 

Problem definition................................................................................................................. 12 

III.3.1.  Quantification of Money Laundering and Terrorist Financing ............................................. 12 

Box 3:  Estimating the costs of mounting terrorist attacks............................................................. 13 

III.3.2.  Areas most affected by Money Laundering and Terrorist Financing.................................... 13 

III.4. 

Problem Drivers .................................................................................................................... 16 

2 

 
 
 
 
 
 
III.4.1.  Problem Driver 1: the existing rules are inconsistent with the recently revised international 
AML/CFT standards.............................................................................................................................. 16 

Box 4:  Main Changes to the International Standards to combat Money Laundering and Terrorist 
Financing 17 

III.4.2.  Problem Driver 2: the existing EU rules are differently applied across Member States 
leading to reduced legal certainty.......................................................................................................... 22 

Box 5:  Different approaches to the calculation of the 25% beneficial ownership threshold in EU 
Member States................................................................................................................................... 23 

Box 6:  Different levels of compliance with the international standards across EU Member States

24 

III.4.3.  Problem Driver 3: Inadequacies and loopholes with respect to the current EU rules. .......... 24 

III.5. 

Baseline scenario – How will the problem evolve without action?....................................... 27 

III.6. 

Problem Tree ......................................................................................................................... 29 

III.7. 

The EU's right to act and justification ................................................................................... 30 

IV. 

Objectives ............................................................................................................................. 32 

V. 

Policy Options: Description, Comparison and Impacts................................................... 34 

V.1. 

Summary Description, Assessment and Comparison of the Main Policy Options ............... 34 

V.2. 

Main Policy Options Relating to the Operational Objectives ............................................... 35 

VI. 

Analysis and quantification of Impacts ............................................................................. 43 

VI.1. 

Compliance costs of the existing framework ........................................................................ 43 

VI.2.  Measuring Administrative Burden under the existing framework ........................................ 44 

VI.3. 

Compliance Costs resulting from the changes to the framework .......................................... 45 

VI.4. 

Impacts of the Framework on Stakeholders .......................................................................... 50 

VII. 

Analysis of other impacts.................................................................................................... 53 

VII.1. 

Impact on fundamental rights................................................................................................ 53 

VII.2. 

Impacts on Small and Medium-Sized Enterprises (SMEs) ................................................... 54 

VII.3. 

Environmental impacts.......................................................................................................... 56 

VII.4. 

International aspects .............................................................................................................. 56 

VII.4.1.  International  Standards......................................................................................................... 56 

VII.4.2.  Third Country Equivalence ................................................................................................... 56 

3 

 
 
 
 
 
VII.4.3.  Competitiveness of EU.......................................................................................................... 57 

VIII. 

Overall impacts of the package .......................................................................................... 57 

VIII.1. 

Impacts of the preferred policy options................................................................................. 57 

VIII.2.  Coherence with other EU initiatives...................................................................................... 59 

IX. 

Monitoring and Evaluation ................................................................................................ 60 

X. 

Annexes................................................................................................................................. 62 

ANNEX I: Glossary .............................................................................................................................. 62 

ANNEX II: The Development of EU and International Policies to Combat Money Laundering and 
Terrorist Financing ................................................................................................................................ 67 

ANNEX III: Detailed Assessment of Policy Options ........................................................................... 70 

ANNEX IV: Costs of Compliance with the Third AMLD by Cross-Border Banking Groups ........... 104 

ANNEX V:Sector by Sector Analysis of Impacts............................................................................... 110 

V.1. 

The Banking Sector ............................................................................................................. 110 

V.2. 

The Payments Sector ........................................................................................................... 111 

V.3. 

The E-Money Sector ........................................................................................................... 112 

V.4. 

Accountants and External auditors...................................................................................... 113 

V.5. 

The insurance Sector ........................................................................................................... 114 

V.6. 

Lawyers/notaries ................................................................................................................. 116 

V.7. 

The gambling sector ............................................................................................................ 117 

V.8. 

Real estate sector ................................................................................................................. 118 

ANNEX VI: Membership of FATF and Moneyval ............................................................................ 120 

ANNEX VII: Efforts to measure effectiveness of AML measures by the Commission ..................... 122 

ANNEX VIII: Comparison of EU Member States' sanctions and penalties for non-compliance with 
AML/CFT rules................................................................................................................................... 123 

ANNEX IX: Comparison of EU Member States' rules implementing AML rules to casinos and the 
gambling sector ................................................................................................................................... 130 

4 

 
 
 
 
 
 
 
I. 

INTRODUCTION  

This  impact  assessment  has  been  prepared  with  a  view  to  the  revision  of  the  Anti-Money 
Laundering framework1.  

Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of 
money  laundering  and  terrorist  financing  (hereinafter  referred  to  as  the  Third  AMLD),  sets 
out  the  framework  designed  to  protect  the  soundness,  integrity  and  stability  of  credit  and 
financial institutions (FIs) and confidence in the financial system as a whole, against the risks 
of money laundering (ML) and terrorist financing (TF).  

The  objective  of  Regulation  EC  1781/2006  on  information  on  the  payer  accompanying 
transfers of funds (hereinafter referred to as the Fund Transfers Regulation) is to enhance the 
transparency  of  fund  transfers  of  all  types,  domestic  and  cross-border,  in  order  to  make  it 
easier  for  law  enforcement  authorities  to  track  funds  transferred  electronically  by  terrorists 
and criminals.  

The EU rules are to a large extent based on international standards adopted by the Financial 
Action Task Force (FATF)2. They have been adapted to fit to an EU context and, as the EU 
Directive follows a minimum harmonisation approach, the framework has been completed by 
rules adopted at national level3. 

The  FATF  has  undertaken  a  fundamental  review  of  the  international  standards,  which 
culminated  in  the  adoption  of  a  new  set  of  recommendations  in  February  20124,  and  which 
place  an  increased  focus  on  the  effectiveness  of  regimes  to  counter  money  laundering  and 
terrorist  financing.  In  parallel  to  the  international  process,  the  European  Commission  has 
undertaken its own review of the European framework. This review has comprised an external 
study  published  by  the  Commission  on  the  application  of  the  Third  AMLD  (hereafter  the 
Deloitte  study)5,  extensive  contacts  and  consultations  with  private  stakeholders  and  civil 
society  organisations6,  as  well  as  with  representatives  of  EU  Member  State  regulatory  and 
supervisory authorities and Financial Intelligence Units (FIUs).  

The results of the Commission's review were set out in a Report to the European Parliament 
and Council7 adopted in April 2012. The Report analysed how the different elements of the 
existing  framework  have  been  applied  and  considered  how  the  framework  may  need  to  be 
changed. The responses to the ensuing public consultation have indicated a need to introduce 
clarifications or refinements in a number of areas. A revision of the Directive would in any 
case have been needed in order to update it in line with the revised FATF Recommendations, 
which in themselves represent a substantial strengthening of the AML/CFT framework.  

1  

2  

3 

4 

5 

6 

7  

The framework is described in section III.2 

See Annex I Glossary 

The Directive is part of a broader set of legislative measures aimed at the prevention of money laundering and terrorist financing 
(see section III.2. Box 2).  

http://www.fatf-gafi.org/dataoecd/49/29/49684543.pdf 

Final Study on the Application of the Anti-Money Laundering Directive, Deloitte, December 2010, 
http://ec.europa.eu/internal_market/company/docs/financial-crime/20110124_study_amld_en.pdf 

In addition, 2 private sector stakeholder meetings were organised in 2011.  

COM(2012) 168 final, Report on the application of Directive 2005/60/EC on the prevention of the use of the financial system for 
the purpose of money laundering and terrorist financing, 11.04.2012. 

5 

 
 
 
 
                                                            
The constantly changing nature of money laundering and terrorist financing threats, driven by 
the limitless ingenuity of criminals coupled with constant technological evolution of delivery 
channels,  necessitates  the  periodic  review,  and  where  necessary  revision,  of  the  legal 
framework designed to counter such threats. 

II. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  

II.1. Procedural issues 

The preparation of this impact assessment has involved close coordination across Commission 
services. An Inter Service Steering Committee (ISSC) on AML was set up in January 2012, to 
discuss initially the draft application report, and subsequently to discuss the preparation of the 
impact assessment. The ISSC comprised the following services: MARKT, HOME, JUST, SG, 
TAXUD, SJ, FPI, and ENTR. The ISSC met on 4 occasions. 

Work on the IA began in March 2012 and has been conducted over a period of five months. 
The  IA  was  submitted  to  the  Impact  Assessment  Board  on  27  July  and  discussed  on  5 
September. The Minutes of the last ISSC meeting were submitted to the IAB. 

The comments received from the IAB resulted in the following main changes: 

•  Additional information has been included in the problem definition regarding 
important differences between certain aspects of Member States' anti-money 
laundering frameworks (with respect to different approaches to identification of the 
beneficial owner, different thresholds applied for cash transactions, differences 
between national penalty regimes for non-compliance with AML rules and the 
differences in application of AML rules to the gambling sector – beyond casinos); 
•  Further information has been added with respect to the main changes at international 

level; 

•  The presentation of objectives and analysis of policy options has been simplified; 
•  The analysis of impacts on SMEs has been strengthened; 
•  The chapter dealing with analysis and quantification of impacts has been strengthened, 
including  a  specific  analysis  of 
in  particular 

incorporating  more  data  and 
administrative burdens; 

•  Explanations have been provided regarding the choice to lower the threshold for cash 

transactions from €15,000 to €7,500; 

•  An  explanation  has  been  included  as  to  why  the  delay  for  responses  to  the 
Commission's  application  report  was  set  for  a  period  shorter  than  the  12  week 
minimum standard for public consultation. 

II.2. External expertise and consultation of interested parties 

The Commission services have made substantial efforts to obtain evidence in this field and to 
ensure full engagement of the different stakeholders: 

•  Over the course of 2010, a study by external consultants Deloitte was carried out on 
behalf  of  the  Commission  to  look  into  the  application  of  the  Third  AML  Directive. 
The study involved an extensive consultation of various stakeholders.  

6 

 
 
 
 
•  Member  State  regulators  have  been  closely  associated  throughout  the  process  with 
the work to prepare revisions to the legislative framework through the Committee for 
the Prevention of Money Laundering and Terrorist Financing (CPMLTF).  

•  Member  State  supervisors  have  made  important  contributions  via  the  European 
Supervisory Authorities’ (ESAs) Anti Money Laundering Committee8. In particular, in 
2011 they produced two important studies on beneficial ownership9 and simplified due 
diligence10. 

•  Representatives  of  Member  State  Financial  Intelligence  Units  (FIUs)  have  been 
associated with the preparation of the legislative texts, and have via the FIU platform11 
in particular contributed ideas on how cooperation between FIUs could be improved, 
as well as how to strengthen available tools and powers.  

•  Over  the  course  of  2011-2012,  the  Commission  organised  two  private  sector 
stakeholder meetings12 in order to discuss issues in relation to the preparation of its 
application report on the Third AMLD13, and the followed these up with a number of 
bilateral  or  sectoral  meetings  with  private  stakeholder  groups  and  civil  society 
organisations.  Participating 
representative  European 
organisations in the banking, insurance, payments, e-money, accountancy, real estate, 
legal and gambling sectors. Also invited were representatives of various civil society 
organisations who had expressed clear interest in money laundering/terrorist financing 
issues. The Commission also carried out a written consultation of private stakeholder 
and civil society representatives between 11 April and 13 June 2012, the main results 
of which are described in Box 114. 

stakeholders 

included 

8  

9  

10  

11  

12  

13  

14  

The Joint Committee of the European Supervisory Authorities´ Sub Committee on Anti Money Laundering (AML Committee, 
AMLC) assists the European Supervisory Authorities in a supervisory capacity, to ensure a consistent implementation of the EU 
law. 

EBA, ESMA and EIOPA’s report on the legal, regulatory and supervisory implementation across EU Member States in relation to 
the Beneficial Owners Customer Due Diligence requirements under the Third Money Laundering Directive [2005/60/EC], 
AMLTF/2011/05, http://eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/JC_2011_096--AMLTF-2011-05-
--UBO-Report-.pdf 

EBA, ESMA and EIOPA’s Report on the legal and regulatory provisions and supervisory expectations across EU Member States of 
Simplified Due Diligence requirements where the customers are credit and financial institutions under the Third Money 
Laundering Directive [2005/60/EC], AMLTF/2011/07, 
http://eba.europa.eu/cebs/media/aboutus/News%20and%20Communications/JC_2011_097-AMLTF-2011-07---SDD-report-.pdf 

The “EU Financial Intelligence Units’ Platform” was set up in 2006 by the European Commission. It gathers Financial Intelligence 
Units from the Member States. Its main purpose is to facilitate cooperation among the FIUs. 

On 11 February and 9 December 2011. 

Report of the first meeting is available at: http://ec.europa.eu/internal_market/company/docs/financial-crime/20110218-
report_en.pdf 

While the Commission's minimum standard for consultation is 12 weeks, in this special case the period for consultation was 
shortened due to the urgent need to adopt proposals in 2012, ahead of the start of FATF's fourth round evaluation process, 
which will begin in 4th quarter 2013. Swift adoption of a Commission proposal is supported by Member States, and is the most 
effective way to provide clear guidance to Member States seeking to adapt their own frameworks in advance of the FATF's 
fourth round evaluation, and the best way of limiting the risk that Member States adopt national rules which might 
subsequently conflict with the revised EU rules. Although the consultation formally closed on 13 June, the Commission services 
took fully into consideration all responses received after the deadline (i.e. 15 responses).  

7 

 
 
 
 
 
 
 
                                                            
Box 1: Results of the Commission's public consultation 

In April 2012, the Commission adopted a report on the application of the Third AMLD, and 
solicited comments from all stakeholders on its considerations.   

In particular,  the report focused on a number of identified key themes (including application 
of  a  risk-based  approach,  extending  the  scope  of  the  existing  framework,  adjusting  the 
approach to customer due diligence, clarifying reporting obligations and supervisory powers, 
enhancing  FIUs  co-operation  etc.),  which  are  central  to  the  review  of  the  Third  AMLD.  In 
addition, the annex to the report addressed a closely related matter, namely cross-border wire 
transfers.   
During  the  consultation  period  the  Commission  received  77  contributions15
  from  public 
authorities,  civil  society,  business  federations  and  companies  in  several  fields  (including 
financial services, gambling sector, liberal professions, real estate sector, trust and company 
service  providers),  representing  a  broad  variety  of  stakeholders.  Replies  came  from  15  EU 
Member States and from some countries outside the EU (e.g. Jersey). 21 of the 77 replies, i.e. 
27%, were provided by pan-European organisations. 

The  overall  results  of  the  consultation  point  to  a  general  confirmation  of  the  issues  and 
problems highlighted by the Commission's Report, as well as broad support for the proposed 
alignment to the revised FATF standards and for greater clarification in particular in the areas 
of  data  protection  and  how  to  apply  the  rules  in  cross-border  situations.  Analysis  of  the 
responses reveals a diversity of opinions, which reflect the different categories of respondents. 
However, the industry most directly concerned by AML compliance generally welcomed this 
review as an opportunity to improve the effectiveness of the AML/CFT regime. Civil society 
organisations have responded with similar views. The feedback statement is available at the 
http://ec.europa.eu/internal_market/company/docs/financial-
address: 
following 
crime/072012_feedback_statement_en.pdf  

III. 

POLICY CONTEXT, PROBLEM DEFINITION AND SUBSIDIARITY  

III.1. 

Background and context 

III.1.1. The nature of the problem of Money Laundering and Terrorist Financing. 

Money laundering and terrorist financing are often subject to the same legislation. However, 
although  the  two  concepts  might  share  many  elements,  their  defining  features  are  quite 
different.  

•  Money laundering concerns activities related to assets which have a criminal or illicit 
origin.  Criminals  engaged  in  money  laundering  will  therefore  attempt  to  conceal  or 
disguise the true nature, source or ownership of the assets in question and transform 
them into seemingly legitimate proceeds. If dirty money is allowed to flow through the 
financial  system,  the  stability  and  reputation  of  the  financial  sector  can  be  seriously 
jeopardised - which in turn could undermine the integrity of the single market. 

Criminal activity  

Apparently clean funds 

Revenue conversion 

15   

Contributions will be available on the Commission website, unless confidentiality has been specifically requested. 

8 

 
 
 
 
 
 
 
                                                            
 
 
 
 
•  Terrorist financing on the other hand concerns the provision or collection of funds to 
carry out any of the offences defined in Council Framework Decision 2002/475/JHA 
on combating terrorism.  Terrorist activities can be funded through legitimate as well 
as  criminal  activities  and  terrorist  organisations  engage  in  revenue-generating 
activities which in themselves may be, or at least appear to be, legitimate. There is a 
clear risk to the integrity, proper functioning, reputation and stability of the financial 
system, and with potentially devastating consequences for the broader society. 

Criminal or legitimate activities   

Terrorist activity 

Funding 

III.1.2. Nature and size of the market concerned 

Obligations  stemming  from  the  EU's  Third  AMLD  are  applied  not  only  by  financial 
institutions  (banks,  insurance  companies,  the  securities  sector,  etc.),  but  the  framework 
extends beyond the traditional financial sector and covers gatekeepers of the financial system 
(auditors,  external  accountants,  tax  advisors,  notaries,  lawyers,  real  estate  agents,  casinos). 
Together,  the  combined  sectors  falling  under  the  scope  of  the  AML/CFT  regime  amount  to 
nearly 10 million employees.  

Compliance with AML/CFT rules has significantly different impacts according to the type of 
obliged entity. Large multi-national financial institutions may employ hundreds of thousands 
of  staff,  but  there  are  also  many  small  and  medium-sized  financial  institutions,  often  active 
only  at  a  local/domestic  level.  Persons  working  in  the  professional  business  services  sector 
(lawyers,  notaries,  accountants,  auditors,  etc.)  may  be  part  of  large  cross-border  groups,  or 
may  work  as  independent  professionals  in  small  offices.  The  ML/TF  risks  associated  with 
each  business,  and  consequently  the  compliance  burdens  resulting  from  application  of 
AML/CFT rules, will vary in accordance with the type of activity, the type of client and the 
geographical location16.  

In  view  of  these  differences  between  sectors,  it  is  not  possible  to  provide  general  data 
regarding how many staff work on compliance issues, and how many of those are specifically 
engaged  in  AML/CFT  compliance.  Some  indications  as  to  the  costs  of  compliance  are 
provided  in  Annex  V  on  a  sector  by  sector  basis,  along  with  additional  background 
information  including  a  general  description  of  each  sector  as  well  as  some  typologies  of 
money laundering and terrorist financing. 

III.1.3. Main stakeholders affected by Money Laundering and Terrorist Financing 

Table 1 

Main stakeholders affected by Money Laundering, Terrorist Financing 
and the necessary countermeasures (under the baseline scenario) 

Who is affected? 

How? 

1. Obliged entities 

•  Credit and Financial institutions 
•  Auditors 
•  External accountants 
•  Tax advisors 

They  are  required  to  implement  the  rules, 
identify  and  verify 
the 
beneficial owner, understand the nature of 
the business relationship, conduct ongoing 

the  customer, 

16  

Annex IV contains an analysis of the costs of compliance with the Third AMLD from the perspective of different types of financial 
institution. 

9 

 
 
 
 
 
                                                            
 
 
•  Notaries 
• 

Independent 
(involved in transactions) 

legal  professionals 

•  Trust or company service providers 
•  Real estate agents 
•  Casinos 
•  Other  natural/legal  persons  trading 
in  goods  when  cash  payments 
>€15,000 
•  Regulators 
•  Supervisors 
•  Financial Intelligence Units 
•  Law enforcement 
Customers of the obliged entities (banks, 
financial institutions, auditors, etc.)  

2. Public authorities 

3. Customers 

4. Business 

Business community in general 

5. Perpetrators 

Criminals,  terrorists,  corrupt  Politically 
Exposed Persons (PEPs) 

6. EU Victims  

EU Society/citizens  

7. Non EU Victims  

Society/citizens/governments 
countries 

in 

third 

monitoring  of  the  business  relationship, 
file  suspicious  reports  to  FIUs,  maintain 
records,  and  comply  generally  with  the 
rules set out in the EU framework.  

They  are  required 
implement  and 
enforce  the  rules  and  protect  the  system 
against criminal/ terrorist abuse 

to 

They  bear 
increased 
the  burden  of 
controls, reduced access to and increased 
cost of services. 

While  increased  controls  and  restrictions 
may  complicate  business  transactions,  an 
absence  of  effective  AML/CFT  regimes 
would 
increase  risks  associated  with 
money  laundering  and  terrorist  financing 
–  which  would  in  turn  be  harmful  to 
business interests  

Are  prevented  from  abusing  the  financial 
system,  or  can  be  traced  and  caught  as  a 
result  of  the  measures  in  place.  However 
they are also quick to exploit any potential 
loopholes in the system. 

to  be  protected 

terrorist 
from 
Need 
attacks, 
loss  of 
increased  criminality, 
welfare  resulting  from  corruption,  tax 
evasion, damage to market integrity, trust, 
etc.  

Need  to  be  protected  against  the  EU 
financial  system  being  used  as  a  channel 
for illicit proceeds drained away from the 
local  economy  as  a  result  of  corruption 
and criminality. 

III.1.4. Impact of Money Laundering and Terrorist Financing 

There  is  a  general  consensus  globally  and  across  political  spectrums  that  immense  damage 
can result if financial systems are insufficiently protected from criminal or terrorist abuse. In 
particular,  systems  which  fail  to  prevent  money  laundering  and  terrorist  financing  expose 
themselves to:  

•  societal risk, stemming from the feedback of criminal and terrorist funds into criminal 

and terrorist activities; 

•  negative  economic  impacts,  arising  from  disruptions  to  international  capital  flows, 

reduced investment and lower economic growth; 

10 

 
 
 
 
• 

financial market instability, resulting from reluctance of other financial intermediaries 
to engage in business, loss of reputation, drop in confidence and prudential risks.  

III.2. 

Overview of legislative framework  

EU legislators have put in place a preventative framework to combat money laundering and 
terrorist financing. The rules are to a large extent based on international standards, adapted to 
fit into an EU context. They are completed by rules adopted at national level:  

Box 2:  Overview of the main legal instruments in the field of AML/CFT 

Directive 2005/60/EC (the "Third AMLD"): 

• 

•  Prohibits  money  laundering  and  terrorist  financing,  and  defines  the  types  of  conduct 
which are considered to constitute such offences. The Directive also defines the types of 
underlying criminal activity (i.e. the "predicate offence") which gives rise to the offences 
of money laundering or terrorist financing; 
Imposes an obligation on the "obliged entities"17 to conduct "customer due diligence, (i.e. 
to  carry  out  checks  on  customers  in  order  to  verify  their  identity,  the  identity  of  the 
beneficial owner18, to understand the nature of the business relationship and to ensure that 
it is monitored on an ongoing basis). Should the obliged entity or person have knowledge 
or suspicion that money laundering or terrorist financing is being or has been committed, 
or attempted, they must promptly inform the Financial Intelligence Unit; 

•  Permits  certain  derogations  from  customer  due  diligence19,  by  allowing  for  simplified 
procedure  in  certain  listed  cases20.  Obliged  entities  must  at  least  gather  sufficient 
information to establish if the customer qualifies for Simplified Customer Due Diligence 
(SDD); 

•  Requires  enhanced  customer  due  diligence  measures,  for  situations  where  there  is  a 
higher risk of money laundering or terrorist financing, such as where the customer has not 
been  physically  present  for  identification  purposes,  in  the  case  of  cross-border 
correspondent  banking  relationships  with  respondent  institutions  from  third  countries, 
and in the case of politically exposed persons residing in another Member State or a third 
country. 

Directive  2006/70/EC  (the  "implementing  Directive")  lays  down  implementing  measures 
for  Directive  2005/60/EC  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. 

17  

18  

19  

20  

Article 2 of Directive 2005/60/EC imposes obligations on financial institutions, auditors, external accountants, tax advisors, 
notaries and other legal professionals (when participating in any financial or real estate transaction), trust or company service 
providers, real estate agents and casinos. There is also an obligation on other natural or legal persons trading in goods where 
payment is made in cash equal to or above €15,000. 

Article 3(6) of the Third AMLD defines “beneficial owner” as the natural person(s) who ultimately owns or controls the customer 
and/or the natural person on whose behalf a transaction or activity is being conducted 

The technical terms used in this Impact Assessment are explained in the glossary in Annex I 

In the case of listed companies, beneficial owners of pooled accounts held by notaries and other legal professionals, domestic 
public authorities, certain types of life insurance policies, insurance policies for pension schemes and pension schemes – subject 
to certain conditions, and electronic money below €250  on a pre-paid, non-rechargeable device, or below €2,500 in the case of 
rechargeable devices.  

11 

 
 
 
 
 
                                                            
Regulation 1781/2006 on information on the payer accompanying transfers of funds: requires 
information  on  the  payer  to  accompany  transfers  of  funds,  with  the  objective  of  ensuring 
prevention,  investigation  and  detection  of  money  laundering  and  terrorist  financing.  The 
Regulation covers all types of fund transfers carried out by electronic means in any currency, 
from  a  payer  to  a  payee,  which  are  sent  or  received  by  a  Payment  Service  Provider  (PSP) 
established  in  the  EU  (Art.  3.1).  This  is  in  order  to  make  it  easier  for  law  enforcement 
authorities to track funds transferred electronically by terrorists and criminals. 

A  number  of  additional  instruments  which  complete  the  framework  are  described  in 
Annex II. 

III.3. 

Problem definition 

III.3.1. Quantification of Money Laundering and Terrorist Financing 

Given the illicit and hidden nature of money laundering and terrorist financing activities, no 
definitive figure can be provided which would accurately quantify the amounts processed by 
criminals  for  these  purposes.  As  definitions  differ  as  to  which  criminal  activities  (e.g.  tax 
evasion)  are  considered  "predicate  offences"  for  money  laundering  purposes,  comparison 
across countries can also be very difficult. 

In recognition of the importance of providing policy-makers with better intelligence about the 
dimension  of  the  problem,  there  have  been  efforts  by  international  organisations  to  conduct 
research  attempting  to  quantify  the  total  amounts  laundered  across  the  globe.  While  any 
estimate  must  of  course  be  treated  with  an  appropriate  degree  of  caution,  there  is  general 
agreement that the amounts involved are very considerable. 

The  most  widely  quoted  research dates back to the 1990s,  when the International Monetary 
Fund (IMF), published a broad ranging estimate which quantified money laundering to be in 
the  region  of  2-5%  of  global  GDP.  In  an  EU  context, if this  range  were extrapolated to  the 
present  day,  with  total  EU  GDP  amounting  to  €  12.27  trillion,  it   could  be  assumed  that  the 
amount of money laundered funds was somewhere between € 245-613 billion (assuming an 
even distribution of money laundering globally). 
More recent research has been published by the United Nations Office on Drugs and Crime21. 
The  findings,  which  are  broadly  in  line  with  the  earlier  IMF  estimates,  suggest  that  all 
criminal  proceeds  are  likely  to  have  amounted  to  some  3.6%  of  GDP  or  around  US$  2.1 
trillion in 2009, with an estimated amount available for money laundering equivalent to some 
2.7  %  of  global  GDP,  amounting  to  some  US$  1.6  trillion.    With  similar  assumptions  as 
above, the amount of money laundered annually in the EU could be estimated at around € 330 
billion. 

While the complex research methods used to calculate global amounts of money laundering 
can  be  contested  and  should  not  constitute  a  sole  nor  definitive  basis  for  policy  responses, 
more  concrete  illustrations  of  the  vast  sums  at  stake  can  be  found  in  real  life  cases  where 
money  laundering  has  actually  been  detected,  and  where  the  facts  are  not  open  to  dispute. 
Cases are many and varied, ranging from small scale operations, to huge schemes involving 
multi million or even multi billion euro amounts. The scale of money laundering uncovered in 

21  

Estimating Illicit Financial Flows resulting from drug trafficking and other transnational organized crimes, UNODC, October 2011. 

12 

 
 
 
 
                                                            
the  case  of  Wachovia22  (to  date,  the  largest  case  of  money  laundering  ever  detected  -  see 
Annex V.1), serves as an important warning of the consequences that can arise in the event of 
a breakdown of AML defence mechanisms.  

With  respect  to  Terrorist  Financing,  no  equivalent  estimates  of  the  overall  amount  of 
terrorist financing exist. According to a report of the UK House of Lords in 2009, however, 
the mounting of terrorist operations appears – in contrast to the sums of money involved in 
money  laundering  –  to  involve  much  smaller  amounts23,  while  the  detrimental  impact  they 
cause on society, on the economy and on security can be enormous, far exceeding the costs of 
mounting operations. 

Box 3:  Estimating the costs of mounting terrorist attacks24 

Maintaining  a  terrorist  network,  or  a  specific  cell,  to  provide  for  recruitment,  planning,  and 
procurement  between  attacks  represents  a  significant  drain  on  resources.  A  significant 
infrastructure  is  required  to  sustain  international  terrorist  networks  and  promote  their  goals 
over time.  

Nevertheless  the  direct  costs  of  mounting  individual  attacks  have  been  low  relative  to  the 
damage  they  can  yield,  both  financial  and  in  terms  of  their  societal  impact.  The  only  costs 
involved  in  domestic  terrorism  are  those  incurred  in  training  and  recruitment  and  the 
commission of the attacks.  

For example, the 2005 London bombings were estimated to have cost just £8.000 (€ 10,000) 
sterling and Madrid train bombings costs were estimated to be $10.000 (€ 8,050).  

Although the CIA estimated that Al-Qaeda had an annual budget of $30 million (€ 24 million) 
prior to 9/11 attacks in New York City, the total cost related to the preparation and execution 
of the attacks themselves was estimated to be no more than $500.000. (€ 400,000) 

The  vastly  different  sums  of  money  implicated  in  money  laundering  and  terrorist  financing 
pose  a  particular  challenge  for  regulators,  financial  institutions  and  gatekeepers  of  the 
financial system – on the one hand, vigilance is called for to keep the system safe against the 
possibility that it is used for the laundering of massive amounts of criminal proceeds, whilst 
on the other hand, mechanisms are needed to detect even the smallest amounts which might 
be used for terrorist purposes. 

III.3.2. Areas most affected by Money Laundering and Terrorist Financing 

The fight against money laundering has evolved over time. While the initial focus targeted the 
illicit proceeds of the drugs trade, the scope of crimes targeted by the AML/CFT framework 
has  been  progressively  broadened  to  include  the  proceeds  of  fraud,  corruption,  and  other 
crimes.  The  current  EU  framework  takes  an  "all  serious  crimes"  approach,  and  includes 

22  

23  

24  

Between May 2004 and May 2007, wire transfers were made from Mexican currency exchange houses to Wachovia amounting 
to $373 Billion: there was no effective AML policy or procedure to monitor, detect and report suspicious wire transfers. 

House of Lords European Union Committee, Money laundering and the financing of terrorism, 22 July 2009 

Various sources: FATF Report on Terrorist Financing (February 2008), UN Monitoring Team Report on Al-Qaeda and the Taliban 
(August 2004) and the Home Office (UK) 

13 

 
 
 
 
                                                            
within its scope all other criminal offences which carry a punishment of imprisonment based 
on a mixture of maximum and minimum thresholds25.   

Similarly, while the framework initially included only credit and financial institutions, it has 
since been broadened to reflect the fact that other "gatekeepers" have an important role to play 
in preventing the system from being abused by criminals and terrorists. Money laundering can 
take many different forms, and beyond the banking sector, money laundering schemes have 
been  detected  involving  lawyers,  the  real  estate  sector,  the  gambling  sector,  the  insurance 
business – indeed all the sectors targeted by the legislative framework.  Examples  of  money 
laundering according to each sector have been included in Annex V. 

While it is difficult to provide estimates of the extent to which the various sectors are affected 
by  money  laundering,  for  the  reasons  described  in  the  previous  section,  information  is 
available about the extent to which the different sectors are filing reports. As with all data in 
this area, the figures must be treated with caution: the concept of a "suspicious transaction or 
activity  report"  can  differ  substantially  across  jurisdictions,  as  do  the  types  of  crime  which 
give  rise  to  a  money  laundering  offence;  the  nature  of  the  business  relationship  with  a 
customer  will  also  have  an  impact  on  the  likelihood  of  reports  being  generated  (each  day, 
banks may be monitoring millions of  transactions, while a lawyer or an accountant may only 
deal with a handful of clients); and given that financial institutions have been covered by the 
framework  for  considerably  longer  than  other  obliged  entities,  they  have  had  more  time  to 
develop the experience and the systems to detect suspicious cases. 

The  following  table  is  taken  from  the  Commission's  publication  Money  Laundering  in 
Europe26 and indicates the number of suspicious reports generated per sector in 2008. By far 
the largest number of filings are made by credit institutions and money transfer institutions. 
Reports  from  the  non-financial  sector  are  on  the  other  hand  much  smaller  by  comparison, 
although there can be substantial variations across Member States. 

25 

26  

Article 3(5)(f) of the Third AMLD. 

See Eurostat Working Paper Money Laundering in Europe, http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-RA-10-
003/EN/KS-RA-10-003-EN.PDF. Further explanations about the Commission's efforts to measure the effectiveness of the AML 
framework are described in Annex VII. 

14 

 
 
 
 
                                                            
Table 2 

Suspicious transaction reports according to sector 

15 

 
 
 
 
 
 
III.4. 

Problem Drivers 

The  challenge  for  the  AML/CFT  framework  is  to  ensure  that  the  EU  rules  –  and  their 
enforcement – keep pace with evolving trends, developments in technology and the seemingly 
limitless ingenuity of criminals to exploit any gaps or loopholes in the system. The EU has in 
the past been at the forefront of the fight against money laundering and has set high standards 
for its framework. However, while that framework is designed to keep the system safe from 
criminal infiltration, there are unfortunately still many cases of money laundering (both in the 
EU  and  across  the  globe)  which  provide  evidence  that  the  problem  of  money  laundering 
continues  to  plague  the  financial  system27:  it  is  a  fair  assumption  that  the  cases  identified 
represent only the tip of a very large iceberg. According to the October 2011 United Nations 
Office  on  Drugs  and  Crime  (UNODC)  study28,  the  amount  of  funds  intercepted  by  law 
enforcement is estimated to amount to less than 1% of the total funds laundered, and actual 
seizures amounted to less than 0.2%29. 

Assessing the extent to which countries' AML/CFT regimes may or may not be effective in 
safeguarding  the  system  from  money  laundering  or  terrorist  financing  is  complex.  Some 
systems  may  encounter  very  low  levels  of  corruption,  and  thus  face  reduced  pressures  to 
combat  the  problem.  Other  countries  may  be  effective  in  facing  up  to  ML/TF  threats  by 
having in place  robust preventive  and dissuasive measures which ensure that the  number of 
cases  of  money  laundering  remains  low.  On  the  other  hand,  it  may  also  be  the  case  that 
countries  faced  with  high  risks  of  money  laundering,  but  which  have  in  place  and  weak 
preventive and enforcement systems, will be less able to identify and catch money laundering 
activity. Such considerations mean that any attempt to establish a link between non- or poor 
compliance  with  AML  rules  and  higher  incidences  of  recorded  ML/TF  cases  will  always 
remain problematic and can be misleading. 

III.4.1. Problem Driver 1: the existing rules are inconsistent with the recently revised 

international AML/CFT standards  

AML/CFT standards are agreed internationally and all EU Member States undergo a rigorous 
assessment process to ensure that their national legislation is in compliance30.  

In February 2012, new international standards were adopted by the FATF which are intended 
to  enable  national  authorities  to  take  more  effective  action  against  money  laundering  and 
terrorist financing at all levels – from the identification of bank customers opening an account 
through  to  investigation,  prosecution  and  forfeiture  of  assets.  They  also  better  address  the 

27  

28  

29  

30  

Recent cases of money laundering in the United States highlight the scale of the problem. In August 2012, Standard Chartered 
Bank reached a settlement with US authorities amounting to US$ 340 million, while Barclays Bank is understood to have set 
aside US$ 700 million to meet expected fines. Further examples of money laundering cases are described in Annex V. 

Estimating Illicit Financial Flows resulting from drug trafficking and other transnational organized crimes, UNODC, October 2011 

According to the UNODC study, the problem appears not to be a lack of international instruments, but shortcomings in the 
implementation of existing instruments in a number of jurisdictions. For that reason, focus at international level is increasingly 
on the evaluation of effectiveness of the systems, as opposed to straightforward compliance. This will be a key aspect of the 
FATF's fourth round evaluation process. 

See Annex VI for further information about international standard setters (FATF and Moneyval) and section IX on the evaluation 
process. 

16 

 
 
 
 
                                                            
laundering of the proceeds of corruption and tax crimes and strengthen the requirements for 
higher risk situations and allow countries to take a more targeted risk-based approach.31 

Box 4:  

Main Changes to the International Standards to combat Money 
Laundering and Terrorist Financing 

There  are  many  detailed  changes  resulting  from  the  revision  of  the  FATF  standards  which 
will require careful and detailed implementation into EU and national legal frameworks. The 
most significant changes for the purposes of this impact assessment are as follows: 

Strengthening  the  risk-based  approach:  countries  more  at  risk  of  money  laundering  or 
terrorist financing will need to do more than those less at risk. Countries need first to clearly 
understand  the  money  laundering  and  terrorist  financing  risks  which  affect  them,  and  adapt 
their  Anti  Money  Laundering/Counter  Financing  of  Terrorism  (AML/CFT)  system  to  the 
nature of these risks – with enhanced measures where the risks are higher and the option of 
simplified measures where the risks are lower.  
Improving  Transparency  measures:  the  new  standards  have  strengthened  transparency 
requirements,  requiring  that  there  is  reliable  information  available  about  the  ownership  and 
control  of  companies,  trusts,  and  other  legal  persons  or  legal  arrangements.  More  rigorous 
requirements  on  the  information  which  must  accompany  electronic  funds  transfers  will  also 
be required. Measures to improve transparency, implemented on a global basis, will make it 
harder for criminals and terrorists to conceal their activities.  
Towards  more  effective  International  Cooperation:  With  the  increasing  globalisation  of 
money  laundering  and  terrorist  financing  threats,  the  FATF  has  also  enhanced  the  scope  of 
international  cooperation  between  government  agencies  (e.g.  simplified  extradition 
mechanisms), and between financial groups. The revised Recommendations will allow more 
effective exchanges of information, tracing, freezing, confiscation and repatriation of illegal 
assets.  
Identification of clear Operational Standards: the FATF Recommendations concerned with 
law  enforcement  and  Financial  Intelligence  Units  have  been  expanded  significantly.  The 
revisions clarify the role and functions of the operational agencies responsible for combating 
money  laundering  and  terrorist  financing;  and  set  out  the  range  of  investigative  techniques 
and powers which should be available to them.  
New threats & new priorities to be covered: The FATF also addresses new and aggravated 
threats and responds to the priorities set out by the international community, e.g. through the 
G20, in particular:  
• 

Corruption & Politically Exposed Persons - i.e. people who may represent a higher 
risk  of  corruption  by  virtue  of  the  positions  they  hold.  The  requirement  to  apply 
enhanced due diligence to foreign politically exposed persons has been expanded with 
new  recommendations  also  applying  to  domestic  politically  exposed  persons  and 
international organisations.  

31  

See FATF press release 16 Feb 2012, http://www.fatf-
gafi.org/topics/fatfrecommendations/documents/fatfstepsupthefightagainstmoneylaunderingandterroristfinancing.html 

17 

 
 
 
 
 
 
 
                                                            
 
• 

• 

Tax Crimes - The list of predicate offences for money laundering has been expanded 
to  include  tax  crimes.  Tax  crimes  are  brought  within  the  scope  of  the  powers  and 
authorities used to combat money laundering.  
Terrorist  Financing  –  the  FATF  recommendations  strengthen  the  requirements  for 
tracking wire transfers, notably through the inclusion of information on the beneficiary 
in  addition  to  the  payer  with  the  wire  transfer.  The  scope  for  exemptions  from  the 
rules has been reduced. 

There  is  a  strong  incentive  on  jurisdictions  to  correct  inconsistencies  with  the  international 
standards.  Full  compliance  can  send  an  important  reputational  signal  which  is  vital  for 
countries seeking to attract foreign investment. Non-compliance, on the other hand, is subject 
to an attentive  follow-up process by  the FATF or  Moneyval. Persistent non-compliance  can 
lead to inclusion in one of the FATF’s Public Statements, which identify: 

•  Jurisdictions  that  have  strategic  AML/CFT  deficiencies  and  to  which  counter-
measures (e.g. entailing a need to apply enhanced customer due diligence to persons 
and institutions situated in those jurisdictions, etc…) apply and;   

•  Jurisdictions  with  strategic  AML/CFT  deficiencies  that  have  not  made  sufficient 
progress  in  addressing  the  deficiencies  or  have  not  committed  to  an  action  plan 
developed with the FATF to address the deficiencies. 

Inclusion  in  the  FATF  public  statement  can  entail  political  and  reputational  damage  for  a 
country's  financial  sector  leading  to  consequential  economic  costs  resulting  from  loss  of 
business, and can prove costly to remedy32. 

It  is  therefore  essential  to  swiftly  proceed  with  a  revision  of  the  EU  framework  to  take 
account of the recent changes to the international standards. In particular, the EU framework 
is not, or is no longer compliant in the following key areas:  

•  Risk-based approach: the risk-based approach allows countries and obliged entities 
and persons to adopt a more flexible set of measures in order to comply with certain 
Recommendations.  This  helps  them  to  target  their  resources  more  effectively  and 
apply  preventive  measures  that  are  commensurate  to  the  nature  of  risks,  in  order  to 
focus  their  efforts  in  the  most  effective  way.  Although  the  Third  AMLD  already 
includes  some  elements  of  a  risk-based  approach  (e.g.  in  the  case  of  CDD  and  risk-
based  supervision),  the  new  FATF  standards  will  broaden  its  application.  In  future, 
countries  will  be  obliged,  via  a  national  risk  assessment,  to  identify,  assess  and 
understand ML/TF risks, and to apply resources to mitigate those risks. There is also 
an acknowledgement that AML/CFT risk assessments at a supranational level should 

32  

For example in October 2010, Greece along with a number of other countries, was placed on the FATF website, in the public 
statement under the title “Improving Global Compliance: on-going process”. This resulted in administrative costs for the credit 
institutions established in Greece increasing -  especially in the field of correspondent banking.  The reputational effects of 
Greece’s "grey listing" were most evident in the correspondent banking area. Correspondent  banks,  in isolated cases,  lifted the 
simplified due diligence status for Greek banks. In some cases, following guidance from  their supervisors or in accordance to 
their own internal policies,  correspondents of Greek banks:  
• 
• 

sought  KYC(Know-your-customer) information from their respondents’   major shareholders/senior management;, 
declined to consider Greek banks as eligible third parties for the purpose of carrying out  CDD  for their  local 
customers on their behalf; 
requested completion of  “extended” Wolfsberg Group Questionnaires ; or  
required  extra documentation for  specific fund tranfers or trade financing transactions to which they had been 
involved.    

• 
• 

18 

 
 
 
 
 
                                                            
be  taken  into  account,  and  that  supervisors  should  apply  a  risk-based  approach  to 
supervision,  based  on  their  understanding  of  the  ML/FT  risks  present  in  the  country 
and within the entities they supervise.  

•  Scope: The new FATF standards have included “tax crimes (related to direct taxes and 
indirect  taxes)”  as  a  predicate  offence33,  meaning  that  (at  least  serious)  cases  of  tax 
evasion should in the future give rise to a money laundering offence, with a view to 
facilitating  international  cooperation  and  criminal  prosecution.  Although  the  Third 
AMLD34  already  sets  out  a  range  of  “serious  crimes”  that  are  considered  to  be 
criminal activities, it does not specifically mention tax crimes35.  

•  Customer  Due  Diligence  (CDD):  the  application  of  the  risk-based  approach  in  the 
new  FATF  standards  will  require  a  more  nuanced  approach  to  the  way  in  which 
situations requiring different levels of CDD are assessed. The current EU framework 
is  based  on  a  more  prescriptive  approach  with  respect  to  those  areas  to  which 
enhanced  due  diligence (EDD) and simplified due  diligence  (SDD)  must  be applied. 
The increased emphasis on the risk-based approach in the revised standards reinforces 
arguments that the current EU approach needs to be changed. 

•  Politically Exposed Persons (PEPs): PEPs36, under the new international standards, 
are  persons  who  have  been  entrusted  with  prominent  public  functions  by  foreign 
countries, or domestically, or by an international organisation. The current approach in 
the Third AMLD is to require EDD measures in the case of PEPs residing in another 
Member  State  or  in  a  third  country.  The  new  international  standards  now  introduce 
risk-based  requirements  for  domestic  PEPs,  so  that  in  future  the  new  standards  will 
apply  different  levels  of  obligation  in  respect  of  foreign  and  domestic  PEPs,  both  as 
customers and beneficial owners of customers. 

•  Beneficial  Owners  (BO):  Under  the  Third  AMLD,  the  BO  means  the  natural 
person(s) who ultimately owns or controls the customer and/or the natural person on 
whose  behalf  a  transaction  or  activity  is  being  conducted.  Private  stakeholders  have 
expressed concerns that the existing EU rules37 are in practice difficult to apply, and 
have called for further clarity and better access to information. The revisions to the 
international standards provide some additional clarity by setting out an approach for 
identifying  and  verifying  beneficial  ownership.  The  Commission’s  EU  Internal 
Security  Strategy  (ISS)38  also  emphasises  that  understanding  the  criminal  source  of 

33  

34  

35  

36  

37  

38  

This term is described in the glossary in Annex I 

Article 3(5)(f) of the Third AMLD. 

Indirectly however certain tax crimes are implicated through Article 3(5)(d) of the Third AMLD, which refers to "fraud, at least 
serious, as defined in Article 1(1) and Article 2 of the Convention on the Protection of the European Communities' Financial 
Interests. The issue of how to improve responses to tax fraud is further considered in a Commission Communication adopted in 
June 2012: " Communication on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to 
third countries (COM(2012) 351 final)". 

Article 3(8) of the Third AMLD defines “politically exposed persons” as natural persons who are or have been entrusted with 
prominent public functions and immediate family members, or persons known to be close associates, of such persons. 

Article 8(1)(b) of the Third AMLD requires, with respect to CDD obligations, identification of the BO and risk-based and adequate 
measures to be taken to verify his identity, 

Commission Communication: "The EU Internal Security Strategy in Action: Five steps towards a more secure Europe", COM 
(2010)673 final. 

19 

 
 
 
 
                                                            
finances  and  their  movements  depends  on  information  about  the  owner  of  the 
companies,  as  well  as  the  trusts  that  those  finances  pass  through.  The  ISS  therefore 
proposes that the EU should consider, in the light of discussions with its international 
partners  in  the  FATF,  revising  the  EU  AML/CFT  legislation  to  enhance  the 
transparency of legal persons and legal arrangements. 

•  Third Country Equivalence: The Third AMLD allows lighter CDD measures to be 
applied  in  the  case  of  credit  and  financial  institutions  situated  in  EU/EEA  countries. 
These  lighter  measures  are  extended  to  institutions  situated  in  third  countries  which 
impose  AML  requirements  considered  to  be  "equivalent"  to  those  laid  down  in  the 
Directive. In order to co-ordinate their approach on equivalence, Member States have 
agreed on a regularly updated list of "equivalent third countries" in accordance with a 
Common Understanding on the Procedures and Criteria for the Recognition of Third 
Countries'  Equivalence39.  However  the  increased  importance  of  the  risk-based 
approach  in  the  revised  FATF  Recommendations  calls  into  question  whether,  going 
forward,  the  equivalence  regime  will  remain  appropriate  at  EU  level.    Given  that 
country risk in the revised FATF Standards is only one of a number of factors40, the 
continued relevance and usefulness of the equivalence list has been questioned.  

•  Cross-border  wire  transfers:  the  EU  has  fully  implemented  the  existing  FATF 
standards via a separate Regulation (1781/2006). This Regulation has the objective of 
making  it  easier  for  law  enforcement  authorities  to  track  funds  transferred 
electronically  by  terrorists  or  criminals  by  imposing  obligations  on  ordering, 
intermediary  and  beneficiary  financial  institutions.  The  new  FATF  standards  in 
particular include a requirement to include information about the beneficiary in wire 
transfers, and limit the possibility for exemptions from the information requirements 
(e.g. in the case of E-Money and mobile telephony fund transfers) There are specific 
obligations  on  money  or  value  transfer  service  providers  (MVTS),  in  particular  a 
requirement to file a Suspicious Transaction Report (STR) in any country affected by 
the suspicious wire transfer, and make relevant transaction information available to the 
Financial Intelligence Unit. 

Table 3 

Summary of the main inconsistencies between the new FATF standards 
and current EU legislation 

Drivers  

New FATF standards 

Current EU legislation 

Risk-based approach 

Introducing national  risk  assessments  and  tailoring 
national  approaches  to  the  different  types  of  risks 
faced.  

•  No  requirement  for  national  risk  assessments,  nor 
for coordination among EU Member States, nor for 
the development of supranational risk assessments 

Greater emphasis on risk-based supervision. 

•  EU  legislation  will  need  to  be  adapted  to  more 

Greater  emphasis  on  risk-based  approaches  for 
obliged entities.  

broadly apply risk-based approaches 

Scope 

Tax  crimes  now  explicitly  give  rise  to  money 
laundering offence. 

•  EU legislation does not explicitly list tax crimes as a 

money laundering offence. 

Customer Due Diligence  A  more  nuanced  approach  to  the  way  in  which 

•  EU legislation is  currently prescriptive with respect 

39 

40  

http://ec.europa.eu/internal_market/company/docs/financial-crime/3rd-country-common-understanding_en.pdf 

Other risk factors are: customer risk,  product, service, transaction or delivery channel. 

20 

 
 
 
 
 
                                                            
to situations requiring/permitting SDD or EDD. 

•  EU  legislation  currently  lists  possible  exemptions 

from SDD. 

•  EU  legislation  currently  only  addresses  foreign 

PEPs 

•  EU 

legislation 

requires  application  of  EDD 
measures for PEPs residing in another MS or a third 
country (not in conformity with standards)  

•  EU  legislation  imposes  a  one  year  time  limit  after 
which persons who have ceased to be entrusted with 
a prominent function are no longer considered PEPs 
(not in conformity with standards), 

•  EU  legislation  stipulates  that  “senior  management 
approval”  means  the  immediate  higher  level  of  the 
hierarchy  of  the  person  seeking  the  approval  –  this 
may not be appropriate in all cases.  

•  EU legislation requires identification by the obliged 
entity of the beneficial owner, but does not specify a 
means  by  which  such  information  should  be  made 
available. 

•  EU  legislation  allows  lighter  CDD  measures  to  be 
applied in the case of credit and financial institutions 
situated 
in  EU/EEA  countries,  which  can  be 
extended  to  institutions  situated  in  third  countries 
which  impose  AML  requirements  considered  to  be 
"equivalent" to those laid down in the Directive. 

•  Member  States  have  agreed  on  a  regularly  updated 

list of "equivalent third countries".  

EU  legislation  requires  information  only  on  the payer  to 
accompany electronic fund transfers. 

EU legislation exempts fund transfers using E-Money and 
mobile phones below specific thresholds. 

EU legislation provides a possibility to exempt electronic 
money and fund transfers using mobile telephones below 
certain thresholds 

EU  legislation  requires  filing  of  an  STR  to  the  FIU  in 
whose  territory  the  institution  or  person  forwarding  the 
information is situated. 

Politically Exposed 
Persons 

Beneficial Owners 

Third country 
equivalence 

Cross-border wire 
transfers 

situations  requiring  different  levels  of  CDD  are 
assessed  is  required.  Need  to  consider  a  range  of 
risk  factors  (e.g.  customer  risk,  geographical  risk, 
and  product,  service  or  delivery  channel  risk 
factors). 

New  risk-based  requirements  to  identify  domestic 
PEPs  and  PEPs  working  for  an  international 
organisation.  

The  new  standards  will  require  obliged  entities  to 
ascertain whether the beneficiary of a life insurance 
policy is a PEP 

The new international standards set out an approach 
for  identifying  and  verifying  beneficial  ownership, 
with  measures  aimed  at  finding  a  natural  person 
with  a  controlling  ownership  interest,  or  (if  none 
can be found or if there are doubts that the person 
with  the  controlling  ownership  interest  is  the 
beneficial  owner)  the  natural  person  exercising 
control through other means. 

The  risk-based  approach  in  the  new  international 
standards calls into question the appropriateness of 
the equivalence regime of the EU - country risk is 
only one of a number of factors that obliged entities 
need to take into account. 

The  new  international  standards  contain  additional 
requirements  for 
transfers  of  funds, 
including information about the beneficiary of wire 
transfers.  

tracking 

There  are  enhanced  requirements  with  respect  to 
verifying information.  

The  new  international  standards  limit  possible 
exemptions from the requirements 

There  are  specific  obligations  on  money  or  value 
transfer  service  providers  (MVTS),  in  particular  a 
requirement to file a Suspicious Transaction Report 
(STR)  in  any  country  affected  by  the  suspicious 
wire 
transaction 
information  available  to  the  Financial  Intelligence 
Unit 

transfer,  and  make  relevant 

21 

 
 
 
 
 
 
 
III.4.2. Problem Driver 2: the existing EU rules are differently applied across Member 

States leading to reduced legal certainty.  

In  addition  to  the  issues  identified  under  Problem  Driver  1,  a  number  of  areas  have  been 
identified41  during  the  Commission's  review  process  where  the  current  EU  rules  result  in 
inconsistent implementation. Such deficiencies cause uncertainties for businesses – especially 
those  needing  to  ensure  compliance  in  a  cross-border  context  –  and  may  impact  on  the 
effectiveness of the overall system to combat AML/CFT risks:  

•  Some concern has been expressed as to the consistency of statistical data relating to 
the  effectiveness  of  AML/CFT  systems42.  Eurostat  has  collected  a  considerable 
amount  of  information  relating  to  key  indicators  from  FIUs43,  however  there  is 
recognition that significant definitional and systemic differences (e.g. different notions 
of  what  constitutes  a  "report",  different  processing  of  reports,  different  approaches 
towards prosecution of cases) considerably undermine comparability across countries 
and complicate effectiveness assessments of AML/CFT systems.  As these differences 
between are the consequence of the different national approaches followed (e.g. what 
needs to be filed, when and how), it is impossible to rely on such information to draw 
any  meaningful  conclusions  about  the  effectiveness  of  the  system.  Information 
received  from  Member  States  is  therefore  not  sufficiently  illustrative  of  the 
effectiveness of national AML/CFT systems. 

•  Article  3(6)  of  the  Third  AMLD  defines  “beneficial  owner”  as  the  natural  person(s) 
who  ultimately  owns  or  controls  the  customer  and/or  the  natural  person  on  whose 
behalf  a  transaction  or  activity  is  being  conducted.  The  Directive  stipulates  a  25% 
threshold  of  ownership  or  voting  rights  or,  in  the  case  of  administered  funds,  the 
beneficiary  of  25%  or  more  of  the  property,  for  the  identification  of  a  “beneficial 
owner”, for AML/CFT purposes. A report by the European Supervisory Authorities44 
has  found  that  the  way  in  which  Member  States  determine  how  the  Beneficial 
Ownership  threshold  should  be  calculated  differs45.  These  differences  may  pose 
difficulties  and  increase  costs  at  group  level  when  designing  customer  identification 
procedures and assessing customer risk. They may also affect the level playing field 
for FIs and Designated Non-Financial Businesses and Professionals (DNFBPs) across 
Member  States.  Effective  implementation  has  also  been  hindered  by  uncertainty 
amongst private sector stakeholders as to how to understand how far the obligation to 
“take adequate measures” to identify the beneficial owner needs to go in practice46.  

41  

42 

43 

44 

45  

46  

 The Commission has been made aware of these issues either because they have been highlighted in the Deloitte study, or as a 
result of contacts with (private and public) stakeholders. 

Art. 33 of the Third AMLD sets out the minimum statistical requirements that Member States are obliged to collect. 

See Eurostat Working Paper Money Laundering in Europe, http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-RA-10-
003/EN/KS-RA-10-003-EN.PDF 

EBA, ESMA and EIOPA’s Report on the legal, regulatory and supervisory implementation across EU Member States in relation to 
the Beneficial Owners Customer Due Diligence requirements under the Third Money Laundering Directive, AMLTF/2011/05, 
April 2012. 

Certain Member States consider that the ultimate beneficial owner (“UBO”) is the person(s) who owns/controls at least 25% of 
the customer, whilst other Member States interpret the UBO as the person(s) that owns/controls at least 25% of the customer, 
or of any entity that owns at least 25% of the customer. Other aspects of the definition give rise to uncertainties or different 
interpretations by Member States, in particular what “otherwise exercises control" over the corporate entity means in Article 3. 

Article 8.1b of the Third AMLD states that Customer Due Diligence shall comprise “identifying, where applicable, the beneficial 
owner and taking risk-based and adequate measures to verify his identity so that the institution or person covered by this 

22 

 
 
 
 
                                                            
Box 5:  Different approaches to the calculation of the 25% beneficial ownership 

threshold in EU Member States 

According to the ESA's study, 13 MS broadly followed a “top down” approach with respect to 
the  calculation  of  the  beneficial  ownership  threshold,  which  means  that  in  cases  of  indirect 
ownership, the percentage/share is determined by reference to the customer only. Some MS 
require  institutions  to  determine  whether  a  natural  person  at  grandparent  level  (or  beyond) 
holds 25% plus one share of the customer or more, e.g. a 30% share (grandparent level) of a 
60% percent share (parent level) in the customer is considered an indirect 18% share in the 
customer  and  is  not  normally  considered  an  ultimate  beneficial  owner.  Other  MS  following 
the “top-down” approach, seeking to determine whether a natural person at grandparent level 
(or beyond) exercises control or owns at least 25% plus one share of the customer (de jure or 
de facto).  

11 MS take the “bottom up” approach that ownership at any layer has to be counted in full, 
e.g. a 30% share (grandparent level) of a 60% percent share (parent level) in the customer is 
considered an indirect 30% share in the customer and thus a person who owns more than 25% 
of such entity is considered the ultimate beneficial owner. 

•  Supervision:  Article  37  of  the  Third  AMLD  obliges  Member  States  to  require 
competent authorities to ensure compliance with the requirements of the Directive by 
all  institutions  and  persons  covered  and  to  ensure  that  competent  authorities  have 
adequate  powers  –  including  to  compel  production  of  any  information  relevant  to 
monitoring compliance and perform checks, and have adequate resources to perform 
their  functions.  Public  stakeholders,  especially  supervisory  authorities,  have  in 
particular expressed concerns about the lack of legal certainty in the current legislative 
texts  about  their  ability  to  ensure  correct  compliance  with  host  state  AML/CFT 
obligations in the case of payment service providers, operating on the basis of a single 
EU passport via branches or agencies. Such uncertainties have the potential to create 
gaps in compliance and might undermine the effectiveness of the framework47.  

•  Article  39(2)  of  the  Third  AMLD  obliges  Member  States  to  impose  appropriate 
administrative  measures  or  sanctions  against  credit  and  financial  institutions  for 
infringements of national provisions which stem from the Directive. The measures and 
sanctions  must  be  effective,  proportionate  and  dissuasive.  While  all  Member  States 
have  been  found  to  have  implemented  a  national  sanctioning  regime  applicable  in 
cases of non-compliance with the provisions of the Directive, and that such sanctions 
are  applied  in  practice,  the  Deloitte  study  concludes  that  “the  variety  in  national 
penalty  regimes  is  so  large  that  it  is  not  possible  to  compare  penalties  through  all 
Member States”48. Different levels of sanctions can significantly impact the readiness 
of  obliged  stakeholders  to  comply  with  the  Directive  and  to  report  suspicious 

Directive is satisfied that it knows who the beneficial owner is, including, as regards legal persons, trusts and similar legal 
arrangements, taking risk-based and adequate measures to understand the ownership and control structure of the customer;” 

In October 2011, the Commission services published a staff working paper entitled “Commission staff working paper on Anti-
money laundering supervision of and reporting by payment institutions in various cross-border situations”, SEC (2011) 1178 
final, http://ec.europa.eu/internal_market/company/financial-crime/index_en.htm#report. The paper seeks to clarify how host 
state AML supervisory responsibilities resulting from the Third AMLD are to be understood in the context of home state 
supervisory responsibilities stemming from the Payment Services Directive. 

See Annex VIII describing the differences between EU Member States' sanctions and penalties for non-compliance with 
AML/CFT rules.   

47  

48  

23 

 
 
 
 
                                                                                                                                                                                          
transactions  to  the  authorities,  which  can  in  turn  impact  the  effectiveness  of  AML 
systems49.  

Table 4 

Summary of the main differences across Member States and their Internal 
Market consequences 

Rules  differently  applied 
by Member States 

Consistency  of 
suspicious transaction reports 

statistical  data  on 

Description 

Consequences 

Significant  definitional  and  systemic 
differences  (e.g.  different  notions  of 
what  constitutes  a  "report",  different 
of 
processing 
different 
towards  prosecution  of 
approaches 
cases) 

reports, 

Reduced comparability of statistical data, 
difficulties 
to  evaluate  and  monitor 
effectiveness. 

Beneficial Ownership 

Differences  on  how 
threshold 
ownership 
calculated 

the  beneficial 
be 

should 

Difficulties  and  costs  for  group  AML 
compliance 

Negative impact on level playing field 

Uncertainty 
effectiveness of group-wide AML  

risks 

undermining 

Supervision  

Lack of legal certainty about supervisors' 
ability  on  host  state  obligations  for 
branches and agencies 

Administrative measures or sanctions 

Differences  in  administrative  measures 
and sanctions 

Gaps 
effectiveness of AML supervision 

compliance, 

in 

reduced 

Uncertainties for cross-border business 

Different  incentives  for  obliged  entities 
to comply with the AMLD via reporting, 
as a result, reduced effectiveness 

Box 6:   Different levels of compliance with the international standards across EU 

Member States  

The results of evaluations carried out by the FATF and Moneyval reveal some differences in 
the  way  that  Member  States  have  interpreted  provisions  in  the  Directive.    For  example,  the 
requirements relating to Simplified Due Diligence in the Directive have generally been found 
to  be  overly  permissive  in  evaluation  reports.    Within  this,  the  provisions  of  the  Directive 
have been interpreted differently, with some Member States considering the provisions to be 
an outright exemption, but others requiring at least some level of customer identification or 
ongoing monitoring.     

III.4.3. Problem Driver 3: Inadequacies and loopholes with respect to the current EU 

rules.  

Both  the  Commission's  review  process,  and  the  revised  FATF  standards  have  identified 
inadequacies  in  the  current  framework.  Under  Problem  Driver  3,  the  focus  is  on 

49  

For example, the Deloitte study (P.132) refers to  an FATF report with regard to one EU Member State where (only) a low 
number of warning letters were sent by the supervisor (supervisor over a very large number of controlled entities) and 
concluded that in the absence of administrative fines, that it was unlikely that there was such a very high level of compliance 
with AML/CFT measures,  

24 

 
 
 
 
 
 
 
                                                            
vulnerabilities  or  inadequacies  which  extend  beyond  those  addressed  by  the  revision  of  the 
international standards, but which appear important to address in an EU context: 

•  Sports betting and other forms of gambling: The Third AMLD includes “casinos” 
within  its  scope,  but  without  providing  any  definition.  The  Directive  also  covers 
activities  “performed  on  the  Internet”  (recital  14),  thus  covering  on-line  casinos. 
However  as  the  Directive  is  based  on  minimum  harmonization,  national  laws  have 
addressed the broader risks associated with other forms of gambling in very different 
ways50.  Private  stakeholders  have  expressed  concerns  that  some  of  the  sectors  most 
vulnerable to AML/CFT risks have not been covered by the legislation. In particular, 
increasing  evidence  is  coming  to  light  about  money  laundering  risks  linked  to 
corruption  in  sport,  and  in  particular  match  fixing.  The  FATF  has  published  a 
Typology  on  the  Football  Sector51  in  which  risks  in  betting  activity  related  to  the 
football sector have been identified.  

•  Dealers in high value goods:  Dealers in high value goods fall within the scope of the 
Directive  where  the  amount  of  the  transaction  exceeds  €15,000  in  cash,  and  are 
required  by  the  Directive52  to  conduct  customer  due  diligence  for  occasional 
transactions  equal  to  or  above  that  amount.  Some  Member  States  (see  table)  have 
taken  a  stricter  approach  towards  the  requirement  for  such  persons  to  conduct  CDD 
and either apply identification requirements as of a lower threshold, or else impose an 
outright ban on payments in cash above certain thresholds. The diversity of thresholds 
across Member States is at best confusing in an Internal Market context, but there is 
also a risk that such differences can lead to vulnerabilities in the borderless Schengen 
environment:  the  Commission  has,  for  example,  received  complaints53  that  the 
proceeds of robberies and thefts committed in one Member State can be anonymously 
converted into cash in another Member State without any requirement to identify the 
customer if the amount of the transaction is less than €15,000. 

Table 5 

Member States with thresholds other than €15,000 for cash transactions, or 

BE 

BG 

50  

51  

52  

53  

54  

55  

imposing stricter requirements  
The following cash transactions are prohibited54: 
•  Cash payment exceeding 5.000 EUR when purchasing one or more goods. 
CDD for cash transactions amounting to10.000 BGN or more (approximately 
5.113 EUR) and a reporting obligation for any cash payment exceeding 30.000 
BGN (approximately 15.339 EUR)55. 

See Annex IX, which illustrates the different coverage of MS laws in relation to casinos and the gambling sector. 

Money Laundering through the Football Sector- July 2009. 

Article7(b) 

See stakeholder response of Syndicat Saint Eloi (http://ec.europa.eu/internal_market/company/financial-
crime/received_responses/responses-to-the-consultation/syndicat-saint-eloi_fr.pdf):  over the course of 2011, 715 attacks were 
recorded against jewellery shops or precious metal dealers, as a result in the strong increase in the price of precious metals. In 
the absence of common thresholds for CDD, criminals can easily circumvent stricter national laws by crossing borders and 
laundering the proceeds of their crimes without any need for identification if the value of the transaction is below the €15,000 
threshold. 

Since 16 April 2012. As of 1 January 2014, this level will be further reduced to €3,000 euro for the sale of goods and service 
provision.  

Article 11a of the Law on the Measures against Money Laundering.  

25 

 
 
 
 
                                                            
DK 

FR 

IT 

LV 

RO 

SI 

Retailers  and  auctioneers  may  not  receive  cash  payments  of  DKK  100,000 
(approximately  13.417  EUR)  or  more  irrespective  of  whether  payment  is 
effected  in  one  instance  or  as  several  payments  that  seem  to  be  mutually 
connected56. 
The following cash transactions are prohibited57: 
•  Transactions over 3.000 EUR when the debtor has his place of residence in 

France or acting in a professional capacity;  

•  Transactions over 15.000 EUR when the debtor does not have his place of 
residence in France or acting in a professional capacity and is not acting in 
a professional capacity.  

It is forbidden58 to transfer cash, in euro or foreign currency between different 
persons when the value of the transaction, even if subdivided, is 1.000 EUR or 
more in total.  
Merchants  dealing  with  precious  metals,  precious  stones  and  articles  thereof 
must  report  when  a  client  pays  cash  in  the  amount  of  10.000  Lats 
(approximately 14.100 EUR) and more. 
Payment  operations  between  legal  entities  shall  be  made  only  by  non-cash 
payment59. 
Persons selling goods shall not accept cash payments exceeding 15.000 EUR 
from  their  customers  or  third  persons  when  selling  individual  goods.  This 
includes legal  entities  and natural  persons  who  organise or  conduct auctions, 
deal in works of art, precious metals or stones or products thereof, and other 
legal entities and natural persons who accept cash payments for goods.60 

Source: Study by consultants Deloitte on the Application of the Anti-Money Laundering Directive 

•  Financial Intelligence Units (FIUs) – the Third AMLD requires each Member State 
to  establish  a  Financial  Intelligence  Unit,  to  serve  as  a  national  centre  for  receiving, 
analysing and disseminating to the competent authorities suspicious transaction reports 
and other information regarding potential money laundering or terrorist financing. The 
manner in which this goal is achieved is not stipulated in the Directive, with the result 
that  the  organisational  nature  of  FIUs  differs  across  Member  States  (they  can  be 
administrative,  judicial,  or  police  structures).  The  current  framework  for  FIU 
Cooperation is based around a Council Decision dating back to 2000 ('the Decision')61. 
Discussions  at  the  FIU  platform62  have  revealed  a  number  of  shortcomings  with  the 
existing  arrangements.  Practical  experience  has  demonstrated  the  types  of  problems 
that result from different interpretations about the legal basis granted by the Decision 

56  

57  

58  

59  

60  

61 

62 

Section 2 of Act on Measures to Prevent Money Laundering and Financing of Terrorism.   

Article D112-3 j. L112-6 of Monetary and Financial Code.  

Article 12(1) of d.lex 201/2011.  

Government Ordinance 15/1996. 

Article 37 of Prevention of Money Laundering and Terrorist Financing Act 

Council Decision 2000/642/JHA of 17 October 2000 concerning arrangements for cooperation between financial intelligence 
units of the Member States in respect of exchanging information. 

The “EU Financial Intelligence Units’ Platform” was set up in 2006 by the European Commission. It gathers Financial Intelligence 
Units from the Member States. Its main purpose is to facilitate cooperation among the FIUs. . 

26 

 
 
 
 
                                                            
to  undertake  specific  types  of  cooperation,  such  as  the  automatic  exchange  of 
information when links are found with another Member State. Some of the problems 
in exchanging information stem from the different powers that FIUs have at national 
level,  including  the  possibility  to  access  information,  with  consequences  for  the 
effectiveness of cooperation.  

•  Group  compliance/data  protection:  Both  public  and  private  stakeholders  have 
pointed  to  a  number  of  difficulties  as  regards  their  compliance  with  AML/CFT 
requirements while ensuring a high level of protection of personal data. Under AML 
legislation,  private  stakeholders  need  to  collect  and  process  data  (e.g.  to  monitor 
transactions and customer relations against sanctions lists, to apply an AML policy at 
group  level,  to  identify  beneficial  owners,  to  maintain  records  for  criminal 
investigation purposes, etc.). There is a lack of clarity about how these requirements 
are to be reconciled with rules on data protection, in particular at national level, which 
is  leading  to  incoherent  approaches  across  Member  States.  In  2009  a  Commission 
Staff Working Paper63 found evidence of problems relating to sharing of data across 
the  group,  including  difficulties  to  organise  identification/verification  of  clients 
centrally, difficulties to monitor cross-border activities of customers across the group, 
and  difficulties  to  share  information  on  suspicious  transactions64.  Clarification  is 
therefore needed in order to enhance effectiveness of AML/CFT prevention, especially 
for  businesses  operating  across  borders,  while  ensuring  a  high  level  of  protection  of 
personal data. In 2011, European Data Protection Authorities issued recommendations 
providing  guidance  as  to  the  application  of  data  protection  rules  in  the  context  of 
AML/CFT65, some of which could already be helpful in clarifying AML legislation. In 
addition, the Commission is revising the European framework on data protection and 
published a set of proposals in January 201266.   

III.5. 

Baseline scenario – How will the problem evolve without action? 

Under  the  baseline  scenario,  the  preventive  system  applied  by  financial  institutions  and 
designated non-financial businesses and professionals would remain in place, but would not 
be adapted in light of changes to the international framework nor in light of the findings of the 
Commission's own review process. In the short run, these would mean that no additional costs 
would  be  incurred  by  private  stakeholders  or  public  authorities.  However  in  the  medium  to 
longer term, failure to adapt the rules would mean that:  

a)  the EU framework would not be in line with international standards (see Table 3), 
EU Member States would receive negative ratings for compliance by the FATF and 
their  financial  markets  and  institutions  would  suffer  reputational  damage.  There 
would  be  a  risk  that,  in  the  absence  of  new  EU  rules,  any  remedial  actions  taken 

63  

64  

65  

66   

Commission Staff working paper on “Compliance with the AML Directive by cross-border banking institutions at group level” SEC 
(2009) 939 of 30 June 2009. http://ec.europa.eu/internal_market/company/docs/financial-crime/compli_cbb_en.pdf 

There is a clear link to problem driver 1, as the new FATF standards introduce a requirement (which largely mirrors work carried 
out by the Basel Committee on Banking Supervision) that financial groups must implement group-wide programmes against 
money laundering and terrorist financing, including policies and procedures for sharing information within the group. 

Opinion  14/2011  of  Article  29  WP.:  http://ec.europa.eu/justice/data-protection/article-29/documentation/opinion-
recommendation/files/2011/wp186_en.pdf  

See the Commission's data protection proposals (COM(2012) 11 final) and (COM(2012) 10 final). 
http://ec.europa.eu/justice/newsroom/data-protection/news/120125_en.htm 

27 

 
 
 
 
                                                            
individually  by  Member  States  at  national  level  would  result  in  fragmentation  of 
the  EU  framework,  uncoordinated  regulatory  responses  and  complications  in 
particular for cross-border AML/CFT compliance by obliged entities; 

b)  The  EU  framework  would  remain  predominantly  rules-based,  and  would  not  take 
account of new emerging risks and threats. Difficulties for cross-border compliance 
resulting  from  different  national  rules  would  persist  and  undermine  the  Internal 
Market (see Table 4).    

c)  Failure to upgrade the AML/CFT system – and in particular failure to make better 
use  of  resources  by  strengthening  the  risk-based  approach  and  placing  more 
emphasis on the effectiveness of the framework – would leave the EU vulnerable to 
evolving threats arising from new business models and technologies. Deficiencies 
identified  with  the  current  rules  as  a  result  of  the  Commission's  review  process 
would not be corrected. 

The  consequences  of  the  above  shortcomings  would  lead  to  reduced  effectiveness  of  the 
AML/CFT regime as well as negative reputational impacts67, which would in turn:  

a)  Impair the Internal Market:  in particular, the lack of coherence between national rules 
would make the organisation of EU cross-border business models more complex and 
burdensome; 

b)  Negatively  impact  the  stability  of  financial  institutions  and  markets:  the  reputational 
damage to the EU financial markets and financial institutions resulting from negative 
listings by the FATF would impair the ability of EU financial institutions to operate 
with  other  global  counterparts  –  who  would  require  evidence  that  the  specific  EU 
financial institutions had robust AML regimes in place despite poor FATF ratings of 
the EU framework.  

c)  Negatively  impact  the  EU  economic  situation:    reduced  interconnectivity  of  the 

financial system would harm business interests – especially internationally;  

d)  Generate  societal  risks  through  increased  ease  of  access  by  criminals  and  terrorists 
into  the  EU  financial  system:  a  system  which,  through  lax  controls,  permits  money 
laundering  and  terrorist  financing  is  at  risk  that  the  proceeds  of  crimes  are  fed  back 
into the system in order to fund additional criminal or terrorist activities.  

These impacts are illustrated in the following problem tree.  

67  

Countries go to great lengths to maintain high international standing with respect to their AML/CFT regimes, and suspicions of 
money laundering within a financial system can be hugely detrimental to investor confidence, and the willingness of foreign 
counterparts to engage in business transactions; this explains why in almost all cases, criticisms or public listing by the FATF are 
met with swift remedial responses. 

28 

 
 
 
 
 
                                                            
III.6. 

Problem Tree 

Problem Drivers 

Consequences

General 
Problems 

Internal Market 
Impact 

Unlevel playing field 
and cross border 
complexity 

Societal Risk

Vulnerabilities feed 
back into criminality 
and facilitate 
terrorist financing  

Economic 
impacts 

Reduced efficiency of 
business 

Financial Market 
Stability 

 Reduced confidence 
in financial markets 
and institutions 

Inconsistency with 
existing standards 

Inconsistency with 
revised standards 

Inconsistency with 
international 
standards 

EU framework: 
•  Is not explicit on tax crimes 
•  Does not require risk assessments 
•  Is not sufficiently risk-based (CDD, third country 

equivalence, supervision) 

•  Does not address domestic and international 

PEPS 

•  Needs to enhance availability of information on 

beneficial ownership 

•  Needs to enhance detection of misuse of 

electronic transfers 

Different application of the rules 

•  Data measuring effectiveness is not comparable 
•  Calculation of 25% beneficial ownership 

threshold differs 

•  Lack of legal certainty with regard to home-host 

supervisory responsibilities  

•  Diverging administrative measures and 

sanctions 

New emerging 
threats 

Over-emphasis on rules 
rather than risks 

Inadequacies and 
loopholes in the 
framework 

•  Vulnerabilities with respect to traders in high 

value goods and in the gambling sector 

•  Uncertainties with respect to data protection 

rules 

•  Gaps affecting FIU cooperation 

Negative 
reputational 
impact 

Reduced 
Effectiveness of 
AML/CFT regimes 

29 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
III.7. 

The EU's right to act and justification  

The Treaty on the Functioning of the European Union empowers the European Commission 
to act in the area of the Internal Market. In particular Articles 26 and 114 stipulate that "the 
Union  shall  adopt  measures  with  the  aim  of  establishing  or  ensuring  the  functioning  of  the 
internal market" and "adopt the measures for the approximation of the provisions laid down 
by law, regulation or administrative action in Member States which have as their object the 
establishment and functioning of the internal market".  

Member  States  have  already  recognized  this  need  for  action  at  EU  level  by  adopting 
legislative  measures  in  this  area  (see  section  III.2  and  Annex  II).  Recital  2  of  the  Third 
AMLD states: "The soundness, integrity and stability of credit and financial institutions and 
confidence in the financial system as a whole could be seriously jeopardised by the efforts of 
criminals and their associates either to disguise the origin of criminal proceeds or to channel 
lawful or unlawful money for terrorist purposes. In order to avoid Member States' adopting 
measures to protect their financial systems which could be inconsistent with the functioning of 
the internal market and with the prescriptions of the rule of law and Community public policy, 
Community action in this area is necessary." 

Furthermore, according to the subsidiarity principle, the EU should act where it can provide 
better results than could be achieved by a response at Member State level. Recital 46 of the 
Third  AMLD  states  that  "since  the  objective  of  this  Directive  […]  cannot  be  sufficiently 
achieved  by  the  Member  States  and  can  therefore,  by  reason  of  the  scale  and  effects  of  the 
action,  be  better  achieved  at  Community  level,  the  Community  may  adopt  measures,  in 
accordance with the principle of subsidiarity".  

As  massive  flows  of  dirty  money  and  terrorist  financing  can  damage  the  stability  and 
reputation  of  the  financial  sector  and  threaten  the  internal  market,  any  measures  adopted 
solely  at  national  level  could  have  adverse  effects  on  the  EU  Single  Market:  an  absence  of 
coordinated rules across Member States aimed at protecting their financial systems could be 
inconsistent with the functioning of the internal market and result in fragmentation. EU action 
is also justified in order to maintain a level playing field across the EU – with entities in all 
Member States subject to a consistent set of AML/CFT obligations68. 

The  evaluation  of  the  new  international  standards  will  begin  in  the  fourth  quarter  of  2013. 
Unless  the  Commission  provides  clear  and  early  indications  of  the  desired  EU  approach  to 
their implementation, there is a risk that those EU Member States who will be evaluated first 
will opt for solutions which may not coincide with the proposed EU approach, thus rendering 
agreement of common EU rules more difficult. 

EU  action  should  be  limited  only  to  what  is  necessary  in  order  to  attain  the  objectives,  and 
must  comply  with  the  principle  of  proportionality.  Several  policy  options  are  considered  in 
Chapter V and in Annex III. The proportionality of each option has been analysed with regard 
to its effectiveness. In all cases, the measures considered do not exceed what is necessary for 
the effective prevention of money laundering and terrorist financing.  

The  EU's  right  to  act  also  needs  to  be  examined  in  the  light  of  the  Charter  of  Fundamental 
Rights  of  the  European  Union  ('the  Charter').  The  potential  impacts  of  the  proposal  on 

68  

For example, different thresholds for applying customer due diligence in the case of cash transactions create vulnerabilities, e.g. 
lower thresholds are in place in some Member States aimed at controlling the sale of precious metals or stones and requiring 
identification of the seller. Criminals seeking to launder the proceeds of stolen goods can easily cross borders and sell the goods 
without the need for identification. 

30 

 
 
 
 
                                                            
Articles  2,  7  and  8  of  the  Charter  (right  to  life,  right  of  privacy  and  protection  of  personal 
data) are explained in detail in section VII.1 of this report.  

Finally, with the adoption of revised international standards, commitments have been taken by 
the Commission as well as all EU Member States (either directly or via their membership of 
FATF or Moneyval) to ensure their implementation.  

31 

 
 
 
 
IV.  OBJECTIVES  

The  overarching  objectives  for  the  revision  of  the  AML  framework  are  identical  to  those 
enshrined  in  the  Third  AML  Directive  and  the  Fund  Transfers  Regulation:  protecting  the 
financial  system  and  the  single  market  from  abuse  by  criminals  seeking  to  launder  illicit 
proceeds, or from terrorists seeking to fund terrorist activities or groups.  

The following general objectives, which in part reflect the objectives expressed in the recitals 
of the Third AMLD, are aimed at addressing the general problems identified in the problem 
tree: 

1 

2 

3 

4 

Strengthen the Internal Market by reducing complexity across borders.  

Safeguard the interests of society from criminality and terrorist acts. 

Safeguard the economic prosperity of the European Union by ensuring an efficient 
business environment. 

Contribute to financial stability by protecting the soundness, proper functioning and 
integrity of the financial system. 

The  specific  objectives  are  linked  more  directly  to  the  specific  nature  of  the  policy 
intervention: 

1 

2 

Ensure that the AML/CFT framework meets high standards in order to safeguard 
the EU financial system. 

 Improve the effectiveness of AML/CFT regimes and thus  protect the financial 
system and the single market from money laundering and terrorist financing. 

The  operational  objectives  are  more  specifically  aimed  at  addressing  the  problem  drivers 
identified in the problem tree: 

Table 6 

Operational Objectives 

Problem  

Driver 1 

Inconsistency with international 
standards 

•  Assessment of the international 

standards have identified 
inconsistencies with the EU legal 
framework 

•  The revision of the international 

standards in February 2012 requires 

Operational objective 

Ensure  that  the  EU  approach  is  consistent 
with  the  approach  followed  at  international 
level  by  extending  the  scope  of  application, 
current 
strengthening 
requirements. 

clarifying 

and 

32 

 
 
 
 
 
 
 
 
that the EU framework be aligned to 
the new standards 

Problem  

Driver 2 

Operational objective 

•  Existing rules of the Third AMLD are 
applied differently by Member States 
leading to reduced legal certainty 

Ensure  consistency  between  national  rules 
and  where  appropriate  flexibility  in  their 
implementation 
and 
clarifying current requirements.  

strengthening 

by 

Problem  

Driver 3 

Operational objective 

•  There are inadequacies and loopholes 
associated with the current EU rules. 

Ensure  that  the  rules  are  risk-focused  and 
adjusted  to  address  new  emerging  threats,  by 
strengthening 
current 
requirements. 

clarifying 

and 

33 

 
 
 
 
 
 
 
V. 

POLICY OPTIONS: DESCRIPTION, COMPARISON AND IMPACTS 

This  section  presents  the  policy  options  and  their  impacts  for  each  policy  area  individually. 
Impacts  are  measured  in  terms  of  effectiveness  (i.e.  the  extent  to  which  they  achieve  the 
objective  of  the  proposal),  efficiency  (notably  cost-effectiveness)  and  coherence  with  other 
overarching objectives of EU policy. 

V.1. 

Summary Description, Assessment and Comparison of the Main Policy 
Options 

An  important  general  issue  to  be  addressed  is  the  level  of  harmonisation  to  be  achieved  in 
order  to  meet  policy  objectives.  Two  approaches  have  been  considered,  with  the  preferred 
option  being  the  one  which  would  most  appropriately  fit  to  all  the  dimensions  analysed  in 
Table 7.  

1.  Fully harmonise the framework:  

A number of stakeholders have called for a full harmonisation approach, which would entail 
the application of a single set of rules across the EU. Full harmonisation would represent the 
best way of achieving a consistent approach across the Internal Market, while implementing 
international standards. However, it would fail to ensure an appropriate degree of flexibility 
across  Member  States  so  that  they  can  address  the  risks  which  are  specific  to  their 
jurisdiction.  This  option  would  not  therefore  fully  satisfy  Operational  Objective  2. 
Furthermore, by denying an appropriate degree of flexible implementation, a fully harmonised 
framework  may  also  run  counter  to  the  risk-based  approach,  potentially  leading  to  EU 
Member  States  being  found  non-compliant  with  the  international  standards.  Although  there 
would be cost advantages for cross-border businesses, there would most likely be significant 
adjustment costs needed for businesses operating only in domestic markets, who would gain 
no  additional  benefits  from  the  single  market.  Full  harmonisation  across  the  board  would 
therefore not be appropriate.   

2.  Introduce additional elements of harmonisation in selected areas: 

This  approach  would  allow  Member  States  to  maintain  a  necessary  degree  of  flexibility  in 
appropriate circumstances at national level, in recognition that this is the most effective way 
to  address  crime  prevention  and  to  ensure  a  tailored  approach  in  certain  areas.  Targeted 
harmonisation can ensure that Member States are able to retain flexible approaches in certain 
areas  (e.g.  in  the  cases  which  call  for  the  implementation  of  risked-based  procedures),  thus 
recognising  that  certain  risks  may  be  different  across  Member  States.  The  harmonising 
approach also brings convergence of rules in other areas (e.g. modifying the scope in order to 
ensure  a  level  playing  field  and  to  enhance  the  Internal  Market,  converging  approaches  to 
identify the beneficial owner, improving comparability of statistical data, etc.).  

When adjusting  the existing framework, each separate dimension under consideration  needs 
to be assessed in light of how effectively it strikes an appropriate balance between flexibility 
and  convergence.  In  the  event  that  the  balance  is  too  far  weighted  in  favour  of  a  flexible 
approach, further consideration is needed with respect to mitigating elements, such as putting 
in place processes to ensure further convergence (e.g. by mandating European supervisors to 
publish  guidance,  or  by  including  the  possibility  for  elements  of  risk  assessments  to  be 
conducted at EU level).   

34 

 
 
 
 
Thus  framed,  targeted  measures  to  promote  convergence  should  achieve  a  correct  balance 
between promoting consistency while at the same time maintaining an appropriate degree of 
flexibility.  The  policy  options  corresponding  to  each  dimension  under  Table  7  have  been 
assessed  with  a  view  to  achieving  that  correct  balance,  while  –  to  the  extent  possible  – 
meeting the operational objectives. 

V.2. 

Main Policy Options Relating to the Operational Objectives 

The  assessment  of  policy  options  in  this  section  represents  a  summary  of  the  more  detailed 
analysis of policy options contained in Annex III. The views of different stakeholders groups 
are  systematically  presented  in  the  same  Annex,  when  comparing  the  identified  policy 
options. For reasons of simplicity, the policy options have been segregated according to the 
three different operational objectives. It is however clear that there are overlaps between the 
problem drivers and objectives and that certain of the changes under consideration could be 
viewed  from  various  angles  (e.g.  adapting  a  risk-based  approach  in  order  to  adhere  to  the 
international standards, while finding the right solutions from an Internal Market perspective). 
The  "no  change  option"  has  been  assessed  in  detail  under  the  baseline  scenario,  and  the 
analysis  is  not  repeated  here69.  In  most  cases,  the  status  quo  would  not  be  a  realistic 
alternative, due to the consequences associated with non-implementation of the international 
standards.  

The assessment of options is made extensively in Annex III to this Impact Assessment. Table 
7  presents  the  results  of  that  analysis  in  the  form  of  each  preferred  option,  as  well  as  the 
alternative option that was assessed. 

Table 7 

Description, assessment and comparison of the main policy options 

DIMENSIONS 

Policy Options relating to Operational Objective 1 (Ensure that the EU approach is 
consistent with the approach followed at international level by extending the scope 
of application, strengthening and clarifying current requirements). 

Preferred Options 

Alternative Options 

DESCRIPTION: 
include  an  explicit 
reference  to  tax  crimes  as  a  predicate 
offence.  It  would  not  provide  a  precise 
definition,  but  use  the  existing  threshold 
approach  applied  in  the  case  of  serious 
crimes. 

DESCRIPTION:    include  tax  crimes  as 
a specific predicate offence, and design 
detailed  rules  for  the  circumstances  in 
which the offence is committed.   

1.  Inclusion of tax 

crimes in the scope 

in 

ASSESSMENT:  This  option  would 
achieve, 
terms  of  effectiveness, 
efficiency  and  coherence,  the  objective 
set.  It  would  bring  about  a  degree  of 
across  Member  States, 
consistency 
although 
across 
jurisdictions would still remain. It would 
comply  with  the  international  standards 

differences 

some 

to  achieve 

ASSESSMENT:  This  would  be  the 
optimal  option 
Internal 
Market  goals.  In  terms  of  effectiveness 
it  would  ensure  coherence  across  the 
EU,  while  sending  a  clear  signal  with 
respect to tax crimes. It would facilitate 
a  more  efficient  environment  for  cross-
border  businesses  and  would  be  in  line 

69  

Except in the case of Dimension 10 (Home and Host Supervisory Responsibilities for AML), where the 
alternative option is in fact the baseline scenario. 

35 

 
 
 
 
 
 
                                                            
and send a clear signal with respect to tax 
crimes.  

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

2.  National Risk 
Assessments  

be 

also 

introduced 

+++ 
0 
+ 
DESCRIPTION: introduce a requirement 
for  Member  States  to  carry  out  a  risk 
assessment  at  national  level  and  take 
measures  to  mitigate  risks.  An  option 
for 
would 
supranational  risk  assessments 
to  be 
undertaken in areas to be determined.  
ASSESSMENT: This option would meet 
the 
the  objective  of 
requirement  to  carry  out  national  risk 
assessments.  The  approach  would  be 
fully  in  line  with  international  standards, 
specific 
while 
supranational  character  of  the  European 
Union.  It  would  give  flexibility  for 
Member  States  to  recognise  national 
differences.  

strengthening 

recognising 

the 

with  international  standards.  It  would 
however entail substantial delays due to 
political  difficulties 
in  agreeing  a 
common  list  of  types  of  tax  evasion. 
the 
This  would  result 
agreement  on  the  whole  AML/CFT 
package and for these reasons it should 
not be retained.   

in  delaying 

+++ 
0 
0 
DESCRIPTION:  treat  the  EU  as  a 
single  jurisdiction  and  require  a  risk 
assessment to be carried out at EU level, 
prescribing  actions  to  mitigate  risks  at 
EU level.  

entities 

operating 

ASSESSMENT:  This  option  would 
result  in  greater  convergence  between 
Member  States'  approaches.  It  would 
bring  about  more  legal  certainty  for 
obliged 
across 
borders.  However  a  supranational  risk 
assessment  may  be  very  costly  and 
resource 
of 
efficiency 
such 
prescriptive  rules  may  lead  to  less 
flexibility  and  adaptability,  impairing 
effectiveness of AML regimes.  

In 
coherence, 

intensive. 
and 

terms 

COMPARISON:                   
Effectiveness 
Efficiency 
Coherence

++ 
+ 
0 

3a.   Customer Due 
Diligence  

DESCRIPTION:  Member  States 
to 
ensure  that  EDD  must  be  conducted  in 
certain  situations  of  high  risk,  while 
allowing  them  to  permit  SDD  in  lower 
risk situations. Determination of the level 
of  risk  would  be  based  on  examples  of 
the  factors  to  be  considered  (such  as 
type,  delivery 
geography,  customer 
channel, 
its 
on 
etc.).  Guidance 
application  would  be  provided  by  EU 
bodies  (e.g.  ESAs  and  other  appropriate 
EU bodies/agencies/committees).  
ASSESSMENT:  This  option  would 
facilitate  a  targeted  approach  to  risk, 
resulting in better mitigation. Publication 
of  guidance  would  ensure  coherence  of 
approach  across  EU  Member  States.  It 

36 

0 
- - 
0 

DESCRIPTION:  introduce  prescriptive 
provisions into the Directive setting the 
conditions for applying EDD and SDD.  

ASSESSMENT:  This  option  would 
ensure a consistent approach and a level 
of  certainty.  The  current  rules  already 
to  a  certain  extent  – 
include  – 
prescriptive  rules  for  the  application  of 

 
 
 
 
 
 
 
 
 
to 

would  be  in  line  with  the  revised  FATF 
standards.  There  could  be  short-term 
costs 
and 
differences  of  interpretation  would  still 
remain.  However,  the  benefits  appear  to 
outweigh the disadvantages. 

implement 

systems, 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+ 
+ 
0 

EDD  and  SDD,  in  some  cases  left  to 
Member  State  discretion.  However  this 
option would not be sufficiently flexible 
to  deal  with  the  changing  nature  of 
  Moreover,  it  would 
ML/TF  risks. 
require  a  resource-intensive  EU-wide 
risk  assessment  in  order  to  determine 
appropriate  prescriptive  provisions  and 
would  not  allow  Member  States  any 
flexibility  to  respond  to  specific  risks 
that they might be facing.  

0 
- - 
0 

3b.   Equivalence of third 
country regimes 

DESCRIPTION: Remove the "white list" 
process. Countries deemed to have AML 
systems not equivalent to those in the EU 
are  treated  as  a  factor/example  to  be 
taken  into  account  by  obliged  entities 
when considering geographical risk. 
ASSESSMENT:  This  option  would 
ensure  consistency  of  treatment  of  third 
the  EU,  while 
countries 
recognising  that  some  third  countries  do 
not  meet  high  EU  standards.  It  would 
allow 
risk-sensitive 
the  use  of  a 
different 
However, 
approach. 
applications  across  EU  Member  States 
may remain.  

across 

DESCRIPTION: completely remove the 
"equivalence"  process,  leaving  Member 
States and obliged entities to make their 
own  decisions  about  risks  associated 
with third country regimes.   

ASSESSMENT:  This  option  would 
arguably  be 
the  most  risk-sensitive 
the 
it  would 
approach; 
concentration  on  one  risk  factor  (i.e. 
geography).  In  contrast,  in  terms  of 
coherence  it  would  result  in  the  least 
convergence  of  approaches  across  EU 
Member States.  

avoid 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

++ 
0 
0 

0 
0 
- 

4.  Risk-Sensitive 
Approach to 
supervision 

DESCRIPTION:  specific  recognition  in 
the  Directive  that  supervision  can  be 
carried out on a risk-sensitive basis, with 
a  role  given  to  ESAs  to  develop  more 
detailed measures. 
ASSESSMENT: This option would allow 
supervisors  to  adopt  approaches  which 
are  more  targeted  towards  risk.  The 
in 
concept  would  be 
developed  sectors  (such  as  banking, 
securities and insurance supervision), and 
less so in certain DNFBP sectors where a 
sectorial  approach  at  EU  level  might  not 
be viable at present.  

appropriate 

DESCRIPTION:  allow  full  discretion 
for supervisors to apply a risk-sensitive 
approach  to  supervision,  without  any 
additional measures at EU level. 

ASSESSMENT:  This  option  would 
maximise  flexibility  for  all  supervisors, 
but  would  potentially  lead  to  a  lack  of 
convergence  as  each  sector  in  each 
Member  State  would  be  supervised 
according 
and 
to  different 
principles.  

risks 

COMPARISON: 

Effectiveness 
Efficiency 

+ + 
+ 

37 

+ 
0 

 
 
 
 
 
 
 
 
 
 
Coherence

0 

0 

5.  Treatment of 

Politically Exposed 
Persons 

introduce 

DESCRIPTION: 
new 
requirements  for  domestic  PEPs/PEPs 
working  in  international  organisations, 
with  risk-sensitive  measures  to  be  taken. 
As  not  all  such  PEPs  are  automatically 
higher  risk,  a  risk  sensitive  element 
would  be  introduced  to  allow  obliged 
entities  to  assess  the  risks  that  they  pose 
and 
to  apply  appropriate  mitigating 
measures. 
ASSESSMENT:  This  option  would 
continue to address highest risks (foreign 
PEPs) and allow a graduated approach to 
other  PEPs.  However,  the  differential 
approach might cause some confusion for 
obliged entities, who would need to apply 
different standards to different categories 
of  PEP.  The  approach  is  consistent  with 
the international standard.   

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+ + 
0 
+ 

6.  Availability of 

beneficial owner 
(BO)information  

owner 

ultimate 

beneficial 

DESCRIPTION: require all companies to 
hold information on their BO. This would 
need  to  be  made  available  to  competent 
public  authorities  and  entities/  persons 
covered by the Directive.  
ASSESSMENT: This option would allow 
greater  transparency  of  information  on 
the 
of 
companies.  It  would  ensure  coherence 
the 
with  Commission's  policy  and 
  Nonetheless, 
international  standards. 
for 
some  cost  would  be  necessary 
recording 
this 
information,  and  making  it  available 
upon request. It would meet the demands 
of  the  European  Parliament  and  civil 
society,  and  assist  entities  and  persons 
covered  by  the  Directive  in  carrying  out 
CDD.  

and  maintaining 

DESCRIPTION:  require  EDD  for  all 
types of PEPs (not just foreign PEPs). 

ASSESSMENT:  By  requiring  a  certain 
level  of  enhanced  due  diligence  to  be 
conducted for each category of PEP this 
option  would  give  greater  clarity  and 
more  consistency  to  the  provisions, 
while  placing  the  EU  ahead  of  the 
international 
It  would 
standard. 
however  come  with  a  high  cost  for 
corresponding 
industry,  without 
benefit.  

a 

+ 
0 
- 

DESCRIPTION: 
require  Member 
States  to  set  up  public  registries  on 
shareholders,  beneficial  owners  and 
nominees. 

this 

ASSESSMENT: 
properly 
If 
implemented, 
option  would 
increase  the  level  of  transparency  and 
would  meet  the  demand  from  civil 
society  and  European  Parliament.  It 
would  assist  obliged  entities.  However, 
it would be a challenge to maintain up-
to-date  information  and  it  would  entail 
substantial costs for Member States. 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+ 
+ 
++ 

+ 
0 
0 

7.  Electronic fund 

DESCRIPTION: 
the  Fund 
Transfers  Regulation  to  reflect  the  new 

amend 

DESCRIPTION: 
require  beneficiary 
and payer information to accompany the 

38 

 
 
 
 
 
 
 
 
 
 
transfers 

the 

international  standard  by  introducing  a 
requirement to include information on the 
beneficiary 
fund 
to  accompany 
transfer, as well as limit exemptions from 
scope.  
ASSESSMENT: 
that 
beneficiary information is included in all 
electronic  fund  transfers  would  provide 
an effective tool for law enforcement and 
ensure  full  traceability  of  all  transfers. 
However, 
(limited) 
additional costs for business to adapt the 
payment systems. 

it  would 

Ensuring 

imply 

payment  as  per 
standard, 
verification  as  of  €0  (as  opposed  to  the 
existing threshold of €1,000). 

international 
identity 

the 
require 

and 

ASSESSMENT:  This  option  would  be 
the  most  effective  way  of  ensuring  full 
traceability  of  electronic  fund  transfers, 
while exceeding international standards. 
In  contrast,  in  terms  of  efficiency,  it 
would entail significant additional costs 
for  non-account  based  payment  service 
providers. 

COMPARISON: 
Effectiveness 
Efficiency 
Coherence

+ 
- 
+ 

- 
- 
+ 

Policy  Options  relating  to  Operational  Objective  2  (Ensure  consistency  between 
national  rules  and  where  appropriate  flexibility  in  their  implementation  by 
strengthening and clarifying current requirements). 

Preferred Options 

Alternative Options  

8.  Comparability of 
statistical data 

DESCRIPTION:  reinforce and make more 
precise  the  requirement  under  Art.  33  with 
respect to collecting and reporting statistical 
data in order to ensure more comprehensive 
and comparable statistics.  
ASSESSMENT:  This  approach  would 
enhance 
important 
effectiveness  indicators  across  the  EU.  It 
would  be  consistent  with  the  international 
standards and in general with our objective. 
However,  comparability  across  Member 
States would possibly remain impaired as a 
result of underlying differences with respect 
to AML approaches.  

comparability 

of 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence  

+ 
- 
+ 

9.  Identification of  

Beneficial Owner. 

in 

refers 

the  "25% 

threshold" 
relation 

DESCRIPTION:  maintain 
the  approach 
which  requires  identification  of  the  BO  as 
of  a  25%  ownership  threshold,  but  clarify 
to, 
what 
particularly 
holding 
companies,  as  well  as  question  of  indirect 
ownership.  
ASSESSMENT:  This  option  would  meet 
the objective of clarification. It would offer 
by  ESAs. 
flexibility 
the 
Nonetheless, 

the  concentration  on 

guidance 

for 

to 

39 

This 

provide 

DESCRIPTION: 
further 
guidance  on  how 
reporting  by 
Member  States  should  be  carried  out 
with  a  view 
to  achieving  more 
coherence between data sets.  
ASSESSMENT: 
option 
improves 
to  measure 
effectiveness of the EU framework. It 
would be in line with the international 
standards.  However,  comparability 
across 
the  Member  States  would 
remain difficult. Thus it would not be 
the best means to achieve the pursued 
objective. 

the  ability 

+ 
- 
0 
DESCRIPTION:  remove  the  existing 
25%  threshold  and  replace  it  with  a 
stricter requirement to always find the 
natural person who owns/controls the 
company.  

ASSESSMENT:  This  option  would 
target  the  potential  risk  (i.e.  person 
who  controls  the  company),  with  a 
potential positive outcome in terms of 

 
 
 
 
 
 
 
 
 
 
 
threshold may not always find the ultimate 
beneficial owner.  

to  a 

guidance 

effectiveness. However, it would lead 
to greater expense for obliged entities 
lack  of  clarity,  unless 
and 
detailed 
prepared. 
is 
Moreover,  the  lack  of  appropriate 
guidance  as  to  what  was  expected 
could  lead  to  a  lack  of  convergence 
across  Member  States  (as  to  the 
the  person  who 
interpretation  of 
"controls" a company).  

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+ 
++ 
+ 

+ 
0 
- 

10. Home and host 
supervisory 
responsibilities for 
AML  

introduce  new 

DESCRIPTION: 
rules 
clarifying  that  branches  and  subsidiaries 
situated  in  other  Member  States  than  the 
head office apply host state AML rules and 
reinforce 
arrangements 
between home and host supervisors.  

cooperation 

ASSESSMENT:  It  would  establish  a  clear 
legal  footing  for  supervisors.  It  would  in 
addition increase clarity for businesses and 
coherence across the EU. On the other hand 
it  could  reduce  flexibility  for  Member 
States.  

the 

clarifies 

DESCRIPTION:  baseline  scenario  - 
no  change  to  the  current  framework, 
as 
the  Commission  has  already 
published  a  staff  working  document 
which 
articulation 
the  Payment  Services 
between 
Directive and the Third AMLD. 
ASSESSMENT:  According  to  some 
stakeholders  and  public  authorities 
the  staff  working  document  does  not 
provide  sufficient  legal  certainty  for 
the 
host 
of 
responsibilities. It would therefore not 
achieve the objective, as it would not 
provide 
supervisors  and  obliged 
entities with legal certainty.  

notion 

home 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+++ 
0 
0 

0 
0 
0 

a 

rules 

set  of 
introduce 
DESCRIPTION: 
minimum 
to 
principles-based 
strengthen  administrative  sanctions,  along 
the  lines  of  the  Commission's  policy  as 
outlined in its Communication "Reinforcing 
sanctioning 
financial 
services sector". 

regimes 

the 

in 

DESCRIPTION:  introduce  a  set  of 
(e.g. 
common  prescriptive 
setting 
sanctions 
the 
according to different offences). 

level  of 

rules 

11.  Sanctions regimes 

entities 

It  would 

enhance 
ASSESSMENT: 
compliance  by  obliged 
and 
comparability  between  Member  States.  It 
would allow for a more consistent approach 
across  Member  States  thereby  ensuring  a 
greater  level  playing  field  and  facilitating 
the business environment.  

40 

ASSESSMENT:  It  would  fulfil  to  a 
certain  extent  the  objective  as  it 
would  create  a  more  level  playing 
field,  while  enhancing  coherence 
across  Member 
The 
Commission's  policy  outlined  in  its 
Communication 
"Reinforcing 
sanctioning  regimes  in  the  financial 
partly 
services 

already 

sector" 

States. 

 
 
 
 
 
 
 
 
 
 
in 

an 

such 

approach. 
advocates 
However, 
the  field  of  AML, 
moving  beyond  the  principles  based 
approach  would  not  allow 
for 
flexibility  for  Member  States  and  it 
could prove to be difficult in practice 
to  agree  on  a  more  detailed  and 
prescriptive approach.  

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

++ 
+ 
+ 

- - 
+ 
+ 

Policy Options relating to Operational Objective 3 (Ensure that the rules are risk-
focused  and  adjusted  to  address  new  emerging  threats,  by  strengthening  and 
clarifying current requirements). 

Preferred Options 

Alternative Options  

DESCRIPTION:  broaden  the  scope  of  the 
Directive  beyond  "casinos"  to  cover  the 
sector,  based  on  a  broad 
gambling 
definition  of  gambling.  The  scope  for 
exemptions from coverage would be limited 
only to circumstances where there is a very 
low risk of ML/TF. 

ASSESSMENT: This option would achieve 
our  objective  in  terms  of  effectiveness, 
efficiency and coherence. It would enhance 
effectiveness  of  the  fight  against  ML/TF 
and  it  would  be  simpler  to  apply.  It  would 
level  the  playing  field  within  the  gambling 
sector,  given  the  fact  that  some  Member 
States  already  apply  AML  rules  across  the 
gambling sector. In contrast, it would entail 
additional  costs  to  sectors  not  currently 
covered  by  the  framework  and  additional 
costs to supervise.  

DESCRIPTION:  adapt  the  scope  to 
cover gambling activities where there 
is a proven higher risk. 

field  with 

ASSESSMENT:  This  option  would 
enhance the effectiveness of the fight 
against  ML/TF,  it  would  level  the 
playing 
non-obliged 
gambling sector. At the same time, in 
terms  of  efficiency,  it  would  not 
impose  any  costs  on  the  gambling 
businesses  which  remained  outside 
the  scope  of  the  Directive.  However, 
it  would  be  more  complex  to  apply 
due  to  the  need  for  identification  of 
higher  risk  activities  and  it  would 
entail additional costs to supervise.  

++++ 
0 
+ 

+ 
- - 
- 

and 

data 

DESCRIPTION: introduce new rules in the 
Directive to  clarify the interaction between 
AML/CFT 
protection 
requirements,  in  particular  relating  to  data 
sharing within groups. 
ASSESSMENT:  This 
option  would 
enhance  coherence  across  Member  States, 
legal  uncertainties 
would  help 
businesses  are  confronted  with  and  would 

reduce 

DESCRIPTION: 
require  Member 
States  to  clarify  interaction  between 
AML/CFT  and  data  protection  rules 
at national level.  

ASSESSMENT: It would help reduce 
uncertainties  with  which 
legal 
and 
businesses 
therefore  enhance  their  compliance 

confronted 

are 

41 

12. Broadening scope to 
cover gambling  

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

13. Data protection  

 
 
 
 
 
 
 
 
 
 
 
 
COMPARISON: 

Effectiveness 
Efficiency 
Coherence

14. Thresholds for 

traders in high value 
goods 

bring  about  cost  savings  for  groups.  It 
would be in line with the new international 
standards.  

with  AML  rules.  It  would  moreover 
ensure  compliance  with  a  high  level 
of  data  protection.  Nonetheless,  it 
would not remove incoherence across 
Member States as a result of differing 
national interpretations.  

+++ 
0 
+++ 

++ 
+ 
- 

DESCRIPTION: reduction of the scope and 
CDD  thresholds  for  traders  in  high  value 
goods  from  €15,000  to  €7,500 70  for  cash 
transactions. CDD measures would need to 
be  applied  for  cash  transactions  of  €7,500 
and above. 

DESCRIPTION:  reduction  of 
the 
scope and CDD thresholds to zero for 
specified obliged entities (e.g. dealers 
in precious metals and stones, second 
hand car dealers, etc.). 

ASSESSMENT:  It  would  address  risk  of 
use  of  cash,  while  bringing  the  threshold 
more  in  line  with  the  common  practice  in 
Member  States.  It  would  bring  more 
obliged  entities 
the  scope,  with 
into 
potential cost implications.  

ASSESSMENT:  On  the  one  hand  it 
would ensure firm controls on the use 
of  cash,  while  a  single  threshold 
would  promote 
certainty.  Some 
Member  States  already  apply  lower 
thresholds  or  indeed  even  forbid  use 
of cash for certain transactions above 
certain  thresholds  (see  Table  5).  On 
the  other  hand,  such  an  approach 
could  drive 
cash 
underground, and impact on financial 
inclusion 

the  use  of 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

15. Cross-border 

cooperation between 
FIUs  

+++ 
0 
+++ 

+ 
- 
+ 

DESCRIPTION:  introduce  new  provisions 
into  the  Directive  regarding  FIU  powers 
and cooperation, including an explicit legal 
basis  for  the  matching  of  anonymous  data 
between  the  EU  FIUs  and  clarifying  the 
circumstances  under  which  exchange  of 
information can take place . 

DESCRIPTION:  establish  a  single 
European  FIU  to  receive  and  analyse 
and  disseminate  to  the  competent 
authorities  disclosures  of  information 
from obliged entities operating within 
the EU. 

70  

The choice of a €7,500 threshold is explained by simply halving the existing threshold. 9 Member States currently apply 
thresholds below the existing €15,000 stipulated in the Directive, of which 4 Member States apply thresholds below €7,500. The 
expected impact on traders of a reduction of the threshold would not be to increase costs, but rather to substantially reduce the 
number of transactions taking place using cash - to the advantage of other payment means (which may carry some additional 
costs – e.g. fees related to a credit card transaction). The impacts associated with the application of different thresholds (e.g. 
€10,000, €5,000) have (in the absence of available data) not been assessed, however it is reasonable to assume that they would 
not reveal significant differences with respect to the likely costs incurred by traders. There would however be different impacts 
on the number of cash payments, according to the chosen threshold. 

42 

 
 
 
 
 
 
 
 
 
 
                                                            
 
Introducing 

cooperation. 

ASSESSMENT: 
new 
requirements would strengthen FIU powers 
and 
enhance 
effectiveness of the fight against ML/FT, as 
well  as  give  legal  clarity.  However,  some 
difficulties  to  exchange  information  may 
still remain. 

It  would 

ASSESSMENT:  This  option  would 
enhance  effectiveness  of  the  fight 
against  ML/TF;  it  would  also  bring 
about potential advantages in terms of 
economies  of  scale  and  efficiency. 
However, it would require substantial 
modifications to Member States' laws 
permitting  cross-border  cooperation 
and information sharing. In addition it 
could  have  a  negative  impact  on  the 
agreement  of  the  Member  States  on 
the whole package. 

COMPARISON: 

Effectiveness 
Efficiency 
Coherence

+++ 
0 
+ 

+ 
0 
0 

VI.  ANALYSIS AND QUANTIFICATION OF IMPACTS  

VI.1. 

Compliance costs of the existing framework 

While  the  Third  AMLD  was  not  accompanied  by  an  Impact  Assessment  at  the  time  of  the 
proposal, the cost implications of the current framework have nevertheless been evaluated on 
an ex post basis. In 2009 an external study71 by consultants Europe Economics on behalf of 
the Commission assessed the costs of compliance with a number of Financial Services Action 
Plan measures (FSAP)72, including the Third AMLD. The study concentrated on firms from 
four  sectors  within  the  financial  services  industry  in  the  EU:  banks  and  financial 
conglomerates, asset managers, investment banks and financial markets.  

The  study's  findings  indicated  that  the  cost  of  compliance  with  AML  requirements  was  not 
insignificant and had increased in recent years following the regulatory changes introduced in 
the  EU,  notably  through  the  Third  AMLD73.  The  focus  was  on  the  so-called  ‘incremental 
compliance  costs’  caused  by  the  FSAP  measures,  rather  than  on  the  total  costs  of  activities 
that contribute to regulatory compliance.  

The study identified separately cost impacts that were of a one-off nature (i.e. those costs that 
only  have  to  be  incurred  once  in  making  the  transition,  such  as  IT  investment  and  the  re-
shaping of business processes) from those that were recurring in nature (on-going costs as a 
result  of  regulation).  The  one-off  costs  of  compliance  with  the  AML  Directive  for  banks, 
financial  conglomerates  and  investment  banks  roughly  accounted  for  10%  of  all  their 

71  

72  

73 

Europe Economics: Study on the Cost of Compliance with Selected FSAP Measures, 5 January 2009. 

The study examined six directives: the Prospectus Directive, the Financial Conglomerates Directive, the Capital Requirements 
Directive, the Transparency Directive, the Markets in Financial Instruments Directive – MiFID and the AML Directive. 

However, an important consideration is that the costs of complying with AML measures in a non-harmonised environment 
would most likely be higher, particularly for cross-border businesses. 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
financial  services  regulatory  costs,  while  for  on-going  costs  of  compliance,  the  percentage 
increased to around 13% of all their financial services' regulatory costs.  

The main source of AML-related compliance spending was on IT. In terms of one-off costs, 
this  included  projects  designed  to:  (i)  meet  the  “Know  Your  Customer”  requirements;  (ii) 
facilitate  increased  monitoring  of  suspicious  transactions  through  increased  automation  of 
processes;  (iii)  facilitate  PEPs  screening;  and  (iv)  assist  in  risk  assessment.  In  terms  of  on-
going  costs,  the  majority  of  IT  expenditure  was  linked  to  access  costs  to  various  databases 
dedicated to the tracking and screening of relevant parties such as PEPs, watch lists etc. While 
some  firms  (generally  larger  banks)  viewed  automation  as  the  only  way  to  provide  the 
necessary  evidence  of  an  audit  trail  to  the  regulatory  authorities  in  the  event  of  problems 
arising  (as  well  as  being  cost  effective  by  comparison  to  manual  effort),  a  number  of  firms 
had opted to retain significant (or total) human oversight in this area. Training and (for larger 
banks) recourse to external consultants were also important sources of costs.  

VI.2. 

Measuring Administrative Burden under the existing framework 

The study carried out by Europe Economics on the costs of compliance of the Third AMLD 
contained  elements  relevant  to  the  measurement  of  administrative  burden  in  the  case  of 
different types of financial institution. The calculations closely reflect those measured under 
the  Standard  Cost  Model  (which  breaks  down  regulation  into  a  range  of  manageable 
components  that  can  be  measured;  information  obligations74,  data  requirements75  and 
administrative  activities76).  The  costs  measured  in  the  study  in  large  part  relate  to  similar 
measurable  elements  (implementation  of  IT  systems,  reporting  (both  internal  and  external), 
hiring additional staff, as well as costs relating to understanding legal requirements). To the 
extent possible, these costs have been calculated to exclude business as usual costs related to 
information  needs  which  would  be  necessary  without  the  imposition  of  AML  rules.  In  the 
table below, which specifically relates to administrative burdens borne by banks and financial 
conglomerates,  the  costs  are  broken  down  according  to  one-off  and  ongoing  costs,  and  are 
presented  as  a  percentage  of  the  total  compliance  costs  associated  with  the  Third  AMLD.   
The types and level of costs will differ across business models, however this information is 
also illustrative of the types of costs facing those entities that will be newly obliged under the 
enlarged scope of the new proposal. 

Table 8 

Breakdown of costs associated with administrative burden (banks and 
financial conglomerates)    

One-off costs 

Familiarisation with the Directive 
Consultancy fees 
Legal Advice 
Training 
Staff recruitment costs 
Investment in/updating IT 
Project Management 

3 %
11 %
1 %
22 %
2 %
54 %
7 %

74  

75  
76  

Information obligations are the obligations arising from regulation to provide information and data to the public sector and / or 
third parties 
A data requirement is each element of information that must be provided in complying with an information obligation 
To provide the information for each data requirement a number of specific administrative activities have to be carried out. 
Activities may be done internally or be outsourced 

44 

 
 
 
 
                                                            
Other 
Mean 
incremental  cost  per  bank  of 
measures related to implementation of the 
Third AMLD 

Ongoing Costs 

Additional staff 
Internal Reporting 
IT 
External Reporting 
Training 
Audit 
Other 
Mean value of ongoing compliance cost per 
bank  related  to  the  requirements  in  the 
Third AMLD 

Further analysis is provided in Annex IV. 

0 %
€ 4,588,000

37 %
4 %
31 %
5 % 
13 %
10 %
0 %
€ 1,195,000

VI.3. 

 Compliance Costs resulting from the changes to the framework 

Measuring the compliance costs resulting from the changes to the framework is particularly 
challenging for a number of reasons: 

• 

In  practice,  there  is  no  reliable  methodology  which  would  allow  clear  separation  of 
additional  costs  from  business  as  usual  costs  (e.g.  costs  associated  with  correct 
customer identification, IT costs relating to the general administration of the system, 
distinction from periodical IT system upgrades, etc.); 

•  Precise  information  from  stakeholders  has  been  difficult  to  obtain,  and  information 

from reliable independent sources is very scarce; 

•  Possibilities to extrapolate across sectors using existing data are limited, as the types 

of entity, and the cost structures, are so diverse. 

Nevertheless,  this  section  has  pulled  together  available  information  which,  although  only 
partial, is intended to illustrate the key cost elements associated with the introduction of a new 
framework. 

The  changes  to  the  existing  framework  will  have  a  number  of  impacts  for  obliged  entities, 
such  as  those  identified  in  the  Europe  Economics  study  (the  need  for  new  IT  investments, 
staff training, a potential increase in the number of consultations of external data bases - e.g. 
as a consequence of the broadened requirement to consider also domestic politically exposed 
persons),  an  increase  in  the  number  of  suspicious  transaction  reports  to  be  filed  (e.g.  as  a 
result  of  the  obligation  to  file  suspicious  transaction  reports  in  any  country  affected  by  a 
suspicious  wire  transfer).  Where  the  scope  is  broadened  to  encompass  entities  that  were 
hitherto  outside  the  scope  of  the  framework  (e.g.  in  the  gambling  sector,  in  those  Member 
States that have not already extended the scope of their AML legislation beyond casinos77), 

77  

See Annex IX: Comparison of EU Member States’ rules implementing AML rules to casinos and the gambling sector 

45 

 
 
 
 
 
                                                            
there will also be one-off costs linked to investment in new systems. Such one-off costs are 
expected to be lower in the case of obliged entities who are already applying the AML/CFT 
rules. 

This  section  is  aimed  at  analysing  the  administrative  costs  that  could  be  imposed  by 
introducing a new legal framework; the costs that obliged entities may incur can be classified 
in different categories: (i) one-off costs (i.e. those costs that only have to be incurred once in 
making  the  transition,  such  as  IT  investment  and  the  re-shaping  of  business  processes)  and; 
(ii)  ongoing  compliance  costs  (i.e.  IT  expenditure  linked  –  in  particular  to  access  costs  to 
various  databases  dedicated  to  the  tracking  and  screening  of  relevant  parties  such  as 
Politically Exposed Persons, watch lists etc., and additional staff). 

The  below  table  summarises  the  most  significant  impacts  of  the  proposed  revisions  to  the 
AML  framework  and  their  cost  implications,  where  relevant  for  existing  obliged  entities, 
newly  obliged  entities,  supervisory  authorities,  national  administrations,  FIUs  as  well  as,  in 
the case of beneficial ownership information, the costs for all legal entities. 

Table 9 

Cost/impact implications for various new measures (preferred options)78 

Obliged 
entities 

Greater 
integration 
of a risk-
based 
approach 
(relevant to 
dimensions 
2, 3a, 3b and 
4 in Table 7) 

Supervisors 

One off costs 
- Potential high impact: adaptation 
of existing systems will entail IT and 
staff training costs, as well as staff 
costs associated with identification, 
assessment and mitigation of the 
entity's own ML /TF risks79. For 
example, in the case of law firms, the 
cost of putting in place new risk 
assessment procedures has been 
estimated by the UK Law Society to 
average £1,200 per larger firm, and 
£300 per smaller firm80. Across the 
sector in the UK, the total cost is 
estimated at around £2.5 million. 
- Potential high impact: will need to 
review ML/TF risk profiles and risk 
assessments prepared by the 
supervised entities. There will also 

Ongoing costs 
- Medium impact: continual training 
and updating of risk assessments.  

- Potential high impact: They will 
need to apply a risk-based approach to 
supervision, based on their 
understanding of the ML/FT risks 

78  

79  

80  

• 

• 

Where information is available, cost quantification is provided on the basis of specific examples. In all cases, impacts are 
subjectively estimated in terms of "high", "medium" or "low" impacts. In a small number of cases, impacts can be positive – 
hence each impact is also measured according to its +/- implications. 

Elements of costs associated with the implementation of the Third AMLC are provided in sections VI.1 and VI.2 

The UK Law Society has provided some estimates of the costs of compliance with respect to putting in place risk assessment 
procedures:  

With respect to the need to review existing procedures/policies/risk assessment and update them, provide training to relevant 
staff, including those in the regulated sector as well as the specialist compliance staff and ensure that any system changes are 
implemented: if it took an MLRO, on a salary of £60,000 pa, one week to review the revised requirements and implement them, 
without taking into account the training costs/lost fee earning time, the cost incurred would be about £1,200 per firm. 

For smaller firms, the task is likely to be more onerous as their existing risk-based procedures may be less sophisticated and may 
need more work to ensure they are sufficiently robust. As a supervisor, the Law Society is committing to assisting firms to meet 
their obligations and is in the process of developing an AML/CFT toolkit to complement our AML/CFT practice note. Such toolkits 
issued by the Law Society in other areas generally retail for £60 and should be able to be tailored to the firm within a day. Using 
the same approach as above, the cost incurred would be £240 plus £60 i.e. £300. There are about 8,500 firms of between 1 to 4 
partners giving a total cost of about £2.5m for that sector. 

46 

 
 
 
 
 
 
 
                                                            
National 
administrations 

Broaden the 
existing 
scope 
(relevant to 
dimensions 
1, 12 and 14 
in Table 7). 

Existing 
obliged entities 

Newly obliged 
entities 

One off costs 
need to be coordination at EU level 
and identification of supranational 
risk elements. 

- Potential high impact: A 
comprehensive national risk 
assessment needs to be undertaken – 
an authority needs to be designated to 
coordinate actions to assess risks and 
apply resources aimed at mitigating 
risks. 
- Low impact: given that some 
systems are already in place, although 
new elements (e.g. risk assessments) 
will still need to be carried out. 

- Potential high impact: e.g. in the 
gambling sector, newly obliged 
entities will need to make 
investments in new systems, staff 
training, etc. Although the business 
models differ significantly and cross-
sector extrapolation should not be  
done lightly, experience in the 
financial sector indicates that one off 
costs associated with adapting to 
AML/CFT requirements can account 
for between 0.16 - 0.29 % of total 
operating expenses.  

Only 9 Member States have restricted 
their frameworks to casinos only (see 
Annex IX) – in the other cases, parts 
or all of the gambling sector are 
already covered, hence the impact in 
those countries will be less 
significant. 

Some impact for traders in goods as a 
result of reduction of threshold to 
€7,500 for cash transactions, although 
it is most probable that rather than 
incur AML compliance costs, most 
traders would insist on non-cash 
means of payment above the 
threshold. .  

Ongoing costs 
present in the country and within the 
entities they supervise. In the financial 
sector, until now the supervisory 
approach (in particular the number of 
on-site inspections) varies significantly 
across EU Member States81 
- Potential high impact: The risk 
assessment needs to be kept up-to-date. 
Work will be needed to coordinate risk 
assessments at EU level 

- Low impact: inclusion of tax crimes 
as a predicate offence may entail 
broader monitoring for suspicions of 
the predicate offence than is currently 
the case, although this is not expected 
to impact significantly. 
- Potential high impact: IT 
expenditure, additional staff recruitment 
costs, costs linked to access to 
databases (PEPs, etc.). Experience in 
the financial sector indicates that on-
going compliance costs amounted to 
0.05%-0.13% of operating expenses. 

In the gambling sector, significant 
business as usual costs (e.g. efforts to 
counter the risks of fraud and cheating, 
monitoring the activities of players in 
order to safeguard the gaming 
activities), already occur, meaning that 
the incremental ongoing costs of 
administering additional AML checks 
may not be that great.  

The variety of business models in the 
gambling sector make estimating 
average costs challenging. By way of 
example, information provided by the 
industry82 on the costs of AML 
compliance in the case of two casinos 
in the EU under the existing framework 
illustrates the significant differences 
according to the size of the business. In 
the first example, the total costs of 
compliance annually amounted to 
€118,050. In the second example of a 
larger casino, annual compliance costs 
amounted to €1,038,400. 

As AML requirements entail seeking 

81  

Source: draft final report by Matrix Insight on the study on the application of the Regulation on information accompanying 
transfers of funds. For example, in UK, the number of visits undertaken in 2010 to non-bank PSPs specifically related to AML/CFT 
and the Fund Transfers Regulation (FTR) amounted to 1,964, resulting in 396 warning letters. However this figure is substantially 
higher than compared to other jurisdictions (for which information was available). In no other case did the number of on-site 
visits exceed 50.  

82  

The European Casino Association 

47 

 
 
 
 
 
 
 
 
  
 
 
                                                                                                                                                                                          
One off costs 

Supervisors 

Financial 
Intelligence 
Units 

Obliged 
entities 

- Medium impact: Supervision of 
entities not hitherto covered will 
entail additional costs for supervisors 
and may require more staff as well as 
systems adjustments – this mainly 
affects the gambling regulators. 
- Low impact: Systems adjustments 
may/may not be needed to handle 
investigations into tax crimes (in 
some Member States, tax crimes are 
already covered) and the broader 
scope of gambling activities. 
- Low impact: Initial identification 
of domestic PEPs and PEPs working 
in international organisations will be 
necessary 

Supervisors 

Financial 
Intelligence 
Units 
Obliged 
entities 

- Low impact: Guidance to obliged 
entities on how the new rules on 
PEPs need to be interpreted.  

- Low impact – no implications for 
major systems changes.  

Ongoing costs 
knowledge and understanding of 
customers, there are likely synergies 
between existing practices and the new 
requirements.  

For traders in goods and services 
operating above the €7,500 threshold 
for cash transactions83, the number of 
customers who need to be verified for 
AML purposes is likely to be very low 
in reality. 6 EU Member States already 
apply thresholds below €15,000. 
- Medium impact: More staff will be 
needed for supervision of newly 
obliged entities (mainly in the gambling 
sector).  

- Low impact: Reception and analysis 
of additional STRs. Outreach and 
feedback to newly obliged entities. 

- Potential high impact: Additional 
costs will be needed in order to check 
PEPs databases, and to periodically 
review existing domestic PEPs. 
Increase in administrative costs due to 
more false positives.  

By way of example, a query to a private 
database in the UK costs between £0.15 
- £1.00, depending on the profile of the 
customer. However in the case of e.g. 
the gambling sector, consultations of 
such databases are not solely required 
with respect to AML compliance, but 
also may be required for other purposes 
(e.g. need to check eligibility, age, etc..) 
- Low impact: Possible additional 
supervision of risk decisions taken for 
new categories of PEPs. 
- Low impact: Reception and analysis 
of additional STRs as more classes of 
PEPs are monitored may have resources 
implications. 
+ Potential high positive impact: 
Greater assistance in identifying the BO 
should lead to reduced costs.  

Information provided by the European 
Federation of Accountants  (FEE) 
indicates that under the existing 
framework, CDD checks take on 
average 0.5-1 hour for "normal" clients, 
but up to one day, or even two days, in 
the case of more complex 
corporate/trust clients. Similar estimates 
might be applied in the case of the legal 

Expand 
definition of 
PEPs 
(relevant to 
dimension 5 
in Table 7) 

Enhance 
availability 
of beneficial 
ownership 
information 
(relevant to 
dimension 6 
in Table 7) 

83  

E.g. second hand car dealers, dealers in precious metals and stones, auction houses, etc. 

48 

 
 
 
 
 
 
 
 
 
 
                                                                                                                                                                                          
One off costs 

Ongoing costs 
profession. 

Improvements in transparency resulting 
from an obligation on firms to have 
information on their beneficial 
ownership already available would be 
expected to considerably reduce the 
time required for CDD checks. 
- Low/medium impact: Possible cost 
of maintaining a national register. 

- Potential high impact: Need to keep 
information on BO updated. Firms are 
better placed to understand their 
ownership structure than obliged  
entities – for many (especially smaller) 
firms this is not expected to amount to 
substantial additional costs. Costs are 
likely to be higher in case of firms with 
more complex and fluid ownership 
structures. 
- Low impact: Increased costs to be 
expected due to incomplete information 
about the beneficiary (payment will be 
either rejected or more information 
from the payee's institution requested). 
However evidence supplied by external 
consultants responsible for reviewing 
the FTR suggests that rejection of 
transfers does not seem to be common 
practice of PSPs, as issues around 
missing information tend to be resolved 
in a different way (e.g. requests for 
complete information, dialogue with 
counterparts, etc.). 
- Low impact: Possible increase in the 
number of STRs filed. 

- Medium impact: requirement to file 
STRs locally will have cost 
implications (these will vary according 
to the type of business model)  although 
clarification of supervisory 
arrangements should facilitate business 
(greater legal certainty). 
+ Low impact: emphasis on 
cooperation between home and host 
supervisors means that some of the 
tasks normally carried out by the home 
supervisor may need to be carried out 
by the host supervisor. 
+ Medium impact: Supervisors should 
have the possibility to rationalise 
AML/CFT compliance supervision 
through proportionate measures, e.g. 
local AML compliance structures.  

- Low/medium impact: Depending 
on which option is chosen by a 
Member State, possible cost of 
setting up a national register.   
- Potential high impact: New 
requirement on firms to hold and 
make available information on their 
beneficial owner(s). For individual 
firms, this requirement would not be 
expected to entail significant burdens. 
However given the total number of 
firms to which this would apply, there 
could be significant cumulative 
impacts.   
- Low impact: Inclusion of 
beneficiary information is not 
expected to result in significant 
additional costs as it is already 
included in most fund transfers. 
Concerns have been expressed about 
potential initial difficulties in the case 
of PSPs, who operate globally and 
also in developing countries. In case 
of slower adaptation in developing 
countries, it may be necessary to 
suspend business relationships with 
PSPs in those countries, leading to 
potential serious costs84. 
- Low impact in terms of costs. Law 
enforcement authorities and FIUs 
should have a more effective tool to 
trace terrorist/criminal fund transfers. 
- Medium impact: requirements to 
comply with host state AML rules 
may entail the need for a local 
compliance structure/facility.  

- Low impact: Need to provide 
information on obliged entities to 
host state supervisors. Need to 
establish appropriate cooperation 
arrangements with host supervisors. 

+ Medium impact: Will need to put 
in place arrangements to ensure 
compliance with local AML/CFT. 
However such structures should 
facilitate the job of supervision. They 

National 
administrations

Firms 

Obliged 
entities 

Enhanced 
information 
requirements 
for 
electronic 
transfers 
(relevant to 
dimension 7 
in Table 7) 

Clarify 
home/host 
supervisory 
respons-
ibilities 
(relevant to 
dimension 
10 in Table 
7) 

Financial 
Intelligence 
Units 
Obliged 
entities 

Home 
Supervisors 

Host 
Supervisors 

84  

Information provided by Matrix Insight consultants, in the context of their study on the application of the Regulation on 
information accompanying transfers of funds 

49 

 
 
 
 
 
 
 
 
 
                                                            
One off costs 
will also need to work closely with 
home supervisors to establish 
appropriate cooperation 
arrangements. 

Ongoing costs 

Obliged 
entities 

Supervisors 

- Medium impact: Possible 
legislative changes needed to increase 
sanctioning powers 

Obliged 
entities 

- Medium impact: Systems changes 
and training costs in order to ensure 
compliance with data protection rules 

Supervisors 

Financial 
Intelligence 
Units 

Financial 
Intelligence 
Units 

- Medium impact: Familiarisation 
with new measures will have staff 
training implications 
- Low impact:  

- Medium impact: Some systems 
changes may be necessary to enhance 
the cooperation capacity of FIUs (e.g. 
access to national databases) 

- Potential high impact: Tougher 
penalty regimes may have cost 
implications as they are intended to 
ensure increased attention to full 
compliance with AML rules. 
+ Potential high impact: The ability to 
sanction firms more heavily for non-
compliance should encourage 
supervisors to exercise increased 
vigilance to ensure full compliance with 
AML rules. 

+ Potential high impact: lower costs 
resulting from greater legal certainty 
and more efficient rationalisation of 
data gathering and dissemination within 
the group. 

+ High impact: Clarification of the 
rules on exchange of data would 
increase legal certainty about the 
conditions under which information on 
STRs can be shared. 
- Medium impact: New powers (e.g. to 
postpone financial transactions) might 
imply an increased role for FIUs – 
implying additional resources. 
Enhanced cooperation will mean 
additional resources in order to respond 
to requests from other FIUs. 

Strengthen 
and 
converge 
national 
penalty 
regimes 
(relevant to 
dimension 
11 in Table 
7) 
Clarify the 
application 
of data 
protection 
rules 
(relevant to 
dimension 
13 in Table 
7) 

Strengthen 
the capacity 
of FIUs to 
cooperate 
across 
borders 
(relevant to 
dimension 
15 in Table 
7) 

VI.4. 

Impacts of the Framework on Stakeholders 

The following table assesses the impacts on the various stakeholders of the proposed changes 
to the AML/CFT framework, including those not included within its scope, but affected in 
different ways all the same. 

Table 10 

Main stakeholders affected by the proposed changes to the AML/CFT 

framework 

Who is affected? 

How? 

1. Obliged 

•  Credit  and  Financial 

institutions 

Credit and financial institutions have had the most experience 

50 

 
 
 
 
 
 
 
 
 
 
Who is affected? 

entities 

•  Auditors 
•  External accountants 
•  Tax advisors 
•  Notaries 
• 

legal 

Independent 
professionals 
(involved 
transactions) 

in 

•  Trust  or 
service 
(TCSPs) 

company 
providers 

•  Real estate agents 

•  Casinos/gambling 

•  Other 

natural/legal 
in 
trading 
cash 

persons 
goods  when 
payments <€15,000 

2. Public 
authorities 

•  Regulators 
•  Supervisors 

How? 

in  applying  AML/CFT  rules,  and  the  changes  under  proposal 
should not significantly impact their business models. It will be 
challenging to apply a more risk-based approach, although this 
element of the new standards has been generally welcomed by 
the  industry.  Clarification  of  data  protection  rules  should 
facilitate  AML/CFT  compliance,  as  should  measures  to  make 
beneficial  ownership  more  accessible.  The  requirement  under 
include  beneficiary 
the  Fund  Transfers  Regulation 
information  is  not  expected  to  generate  substantial  additional 
impacts,  as  in  most  cases  fund  transfers  already  incorporate 
such  information.  Widening  the  definition  of  PEPs  will  have 
some  impact  on  these  institutions,  who  will  need  to  assess  the 
risks  and  apply  appropriate measures  to additional  categories 
of customers. 

to 

The  general  scope  of  application  of  the  Directive  will  not 
change  with  respect  to  business  professionals.  On  the  one 
hand,  application  of  the  risk-based  approach  could  lead  to 
more  effective  allocation  of  resources  within  companies,  and 
the  ability  to  focus  on  the  riskier  elements  of  business  might 
carry  advantages  for  professionals  and  SMEs  working  with 
lower risk clients (the converse is also true – higher risk clients 
will  require  more  thorough  checking  and  procedures).  New 
rules on PEPs may also require more frequent consultation of 
external databases. 
Depending  upon  the  option  chosen  by  Member  States  for 
complying with beneficial ownership obligations, TCSPs could 
be required to hold and maintain information on the beneficial 
ownership  of  corporate  entities.  The  implications  of  this  will 
vary according to the option(s) chosen by Member States. 
The  only  change  potentially  affecting  parts  of  the  real  estate 
sector  specifically  will  be  an  extension  of  the  possibility  to 
allow self-regulatory bodies to monitor and ensure compliance 
with  the  AML/CFT  rules  (Art.  37.4  3AMLD).  Otherwise,  real 
estate agents will be impacted in similar ways to other obliged 
business professionals, as described above. 
Those  businesses  in  the  gambling  sector  which  already  apply 
the  AML/CFT  provisions  will  be  affected  in  similar  ways  to 
those  described  above.  There  will  also  be  a  levelling  of  the 
playing  field  with  other  businesses  active  in  the  gambling 
sector which until now have not been covered by the AML/CFT 
framework.  For  those  businesses,  there  will  be  important 
adjustments, and investments needed in the form of IT systems 
and training, as well as new ongoing compliance costs. 
A particular impact will be the reduction of the €15,000 scope 
threshold to €7,500, which may make an additional number of 
entities  subject  to  the  requirements  of  the  Directive,  but  will 
most  likely  rather  encourage  traders  (e.g.  precious  metal 
dealers,  second  hand  car  dealers,  auction  houses)  to  accept 
non-cash payments.. 
The  strengthening  of  the  risk-based  approach  will  require 
national risk assessments to be compiled. Guidance will need to 
be provided  to  obliged  entities  on how  to apply  the rules,  and 
supervisors will also need to develop risk-sensitive supervision 
–  which  should  allow  them  to  more  effectively  target  their 
resources to areas of greater risk. There will also be a role for 

51 

 
 
 
 
 
Who is affected? 

How? 

•  Financial  Intelligence 

Units 

•  Law enforcement 

•  National registries 

3. Customers 

Customers  of  the  obliged 
entities  (banks,  financial 
institutions, auditors, etc.)  

4. Business 

Business  community 
general 

in 

the  AMLC  at  European  level  to  contribute  to  supranational 
elements  of  risk  and  threat  assessments  for  obliged  entities  in 
their sectors. 

The  strengthening  of  cooperation  arrangements,  which  is  not 
expected  to  impose  significant  additional  costs,  as  well  as  the 
clarification of data protection rules, should benefit the work of 
FIUs  from  an  effectiveness  perspective.  Law  enforcement 
should benefit from the overall strengthening of the AML/CFT 
framework,  which  should  result  in  greater  detectability  of 
criminality (improved detectability of electronic fund transfers, 
PEPs,  BOs,..).  At  EU  level,  both  the  FIU  platform  as  well  as 
Europol  will  be  expected  to  contribute  to  supranational  risk 
and threat assessments. 

Depending on which option Member States choose for making 
beneficial  ownership  information  available,  the  setting  up  and 
maintaining of public registries is something that might impose 
additional costs. 

No major impacts are expected for customers of obliged entities 
(fundamental  rights  issues  are  separately  assessed  under 
section VII.1) resulting from changes to the existing framework. 
However the extent to which AML rules in general may/may not 
contribute  to  financial  exclusion  (e.g.  due  to  refusal  by  some 
banks to open accounts for customers on the grounds of money 
laundering  concerns)  remains  an  important  issue.  An  analysis 
of the Third AMLD by Commission services has concluded that 
the  Directive  in  itself  does  not  create  any  barriers  to  opening 
accounts.  In  particular,  the  current  AML  provisions  do  not 
require a person who wishes to open a bank account to produce 
an ID card or passport. It can therefore be concluded that it is 
rather  financial  institution's  own  internal  processes  or  bank 
staffs'  perhaps  overly  cautious  application  of  anti-money 
laundering rules which may be creating these “false barriers”. 
The  introduction  of  a  risk-based  approach  and  its  application 
to  customer  due  diligence  procedures  may  in  fact  have  a 
positive  impact,  potentially  limiting  any  refusals  to  open 
accounts  to  genuine  cases  of  ML/TF  risk.  This  issue  is  more 
broadly  addressed 
initiative  currently  under 
in  another 
consideration by the Commission on payment accounts.    

In the case of the gambling sector, customers of establishments 
newly  covered  by  the  AML/CFT  rules  will  be  required  to 
provide proof of identity above a threshold of €2,000. 

information  available, 

Depending on which option Member States choose for making 
beneficial  ownership 
the  potential 
requirement  on  companies  to  hold  information  on  their 
shareholders and their beneficial owners will have impacts on 
the business community. The burden will be partly shifted from 
the  obliged  entities  to  the  corporate  customers  of  the  obliged 
entities,  who  are  better  placed  to  provide  information  about 
their ownership. 

No  other  major  impacts  from  the  changed  rules  are  to  be 
expected, either on larger businesses or for SMEs. 

52 

 
 
 
 
Who is affected? 

How? 

5. Perpetrators 

Criminals, 
including 
terrorists and corrupt PEPs 

6. EU Victims  

EU Society/citizens  

7. Non EU 
Victims  

Society/citizens/governme
nts in third countries 

Criminals, terrorists and corrupt PEPs should find it harder to 
launder  or  transfer  funds,  as  their  activities  will  be  subject  to 
more  effective  monitoring  by  obliged  entities,  FIUs  and  law 
enforcement. 

Strengthening  the  AML/CFT  framework  should  have  societal 
benefits  –  protecting  society  against  terrorism  and  criminal 
abuse of the financial system. 

The adoption of international standards should mean that high 
AML/CFT 
the  globe. 
standards  are  achieved  across 
Strengthening the EU system should ensure that the proceeds of 
corruption, which drain away wealth and resources from third 
countries,  and  the  proceeds  from  all  other  predicate  offences 
are less easily processed through the EU financial system. 

VII.  ANALYSIS OF OTHER IMPACTS  

VII.1.  Impact on fundamental rights 

The  Commission's  proposal,  which  has  to  respect  the  Charter of  Fundamental  Rights  of  the 
European  Union  ('the  Charter')85,  should  strengthen  fundamental  rights  laid  down  in  the 
Charter.  The  proposal  will  help  to  protect  the  fundamental  right  to  life  (Article  2  of  the 
Charter) which is threatened by criminal activities and terrorism. The Charter also recognizes 
as a fundamental right the protection of private life and personal data (Articles 7 and 8 of the 
Charter).  Article 52 of the Charter86 recognizes that some limitations to fundamental rights 
may be laid down by law if proportionate and necessary, for example to protect fundamental 
rights and liberties of other people 87. Finally, the proposal will have no impact on the right to 
an effective remedy and to a fair trial (Article 47 of the Charter), as no changes to the current 
provisions are proposed in this respect . Although legal professions regularly express concerns 
that  this  right  and  their  obligation  of  professional  secrecy  would  be  violated  by  AML/CFT 
obligations to report suspicious transactions,  the European Court of Justice88 has ruled that 
since reporting obligations only apply to activities of a financial or real estate nature and do 
not apply in the context of judicial proceedings, they fall outside the scope of the right of a 
fair trial.     

AML/CFT  legislation  requires  obliged  entities  to  know  their  customers  –  as  well  as  certain 
other persons who are not always their customers (e.g. beneficial owners) – and to assess their 
associated ML/TF risks. For that purpose, obliged entities need to collect, process and record 
personal data, and sometimes to share such data with public authorities (such as FIUs) or with 
private entities within the same group. These requirements have implications for such persons 

85  

86 

87  

88  

http://www.europarl.europa.eu/charter/pdf/text_en.pdf 

CJEU, judgment of 9.11.2010 in joined cases C-92/09 and 93/09, Schecke. 

The principles of necessity and proportionality are also required by Article 8 of the Charter and Article 16 of the Treaty on the 
 Functioning of the European Union) 

ECJ C305/05, Ordre des barreaux francophones et germanophones et al. V Conseil des Ministres, Para 33, Judgment of the 
Court, 26 June 2007. 

53 

 
 
 
 
 
                                                            
with  respect  to  their  rights  regarding  respect  of  private  life  and  protection  of  personal  data 
while having an overall security impact (general interest).  

The  proposal  should  also  reinforce  fundamental  rights  by  bringing  clarification  on  how 
institutions need to apply AML/CFT requirements in a way which is compatible with a high 
level of protection of data, in comparison to the current situation where legal uncertainties can 
lead to inefficient outcomes (i.e. as regards their degree of protection of data). As an example, 
by specifying the conditions under which data can be retained, protection of data subjects will 
be strengthened. 
The  different  options  considered  in  this  impact  assessment89  and  aimed  at  clarifying  data 
protection rules will not have identical impacts on fundamental rights. Under Dimension13 in 
Table  7,  the  option  which  aims  to  clarify  the  interaction  of  data  protection  and  AML/CFT 
rules at EU level would be the only option which would ensure the same level of protection 
for all citizens of the EU, whereas clarification at Member State level would leave room for 
divergent interpretations, incoherence across Member States and would thus not place all EU 
citizens on an equal footing. 

Some of the proposed measures considered in this impact assessment may involve a degree of 
limitation to the right of respect for private life and data protection, such as the proposal to 
enhance  availability  of  information  on  shareholders,  beneficial  ownership  and  nominees 
(Dimension  6).  The  proposal  would  limit  the  possibility  for  some  persons  to  make  use  of 
corporate  vehicles  where  beneficial  ownership  information  is  not  always  immediately 
apparent. However, this limitation would be formulated in a clear and proportionate manner 
(these persons would need to know in advance that information on them could be accessed, as 
this possibility  would  be foreseen in  the law) and the Commission considers it necessary in 
order to achieve the objectives of enhancing the effectiveness of the fight against ML/FT and 
complying with the new international Recommendations. Currently there is a gap in the AML 
legislation, as institutions are required to know their customers and understand the nature of 
their business, but have difficulties to access information on them as such information is not 
publicly  available.  This  limitation  would  also  be  proportionate  to  the  aim  and  preserve  the 
essence of the right. It would still be possible to use legal entities and arrangements such as 
nominee  companies  or  trusts,  but  information  on  them  would  be  more  accessible.  The 
different  options  considered  with  respect  to  availability  of  beneficial  ownership  information 
would  not  have  identical  impacts  on  fundamental  rights.  If  availability  of  information  were 
limited  to  competent  authorities  and  obliged  entities,  the  limitation  would  be  strictly 
proportionate to what is necessary to achieve the objective of helping obliged entities to know 
their  customers.  If  information  were  to  be  made  available  to  all  citizens  though  a  public 
register,  this  would  constitute  a  more  substantial  limitation  to  the  privacy  right,  but  would 
allow  the  attainment  of  other  objectives,  such  as  helping  other  entities  not  covered  by  the 
directive in their fight against ML/TF (e.g NGOs) or fighting tax evasion.  

Despite  the  limitations,  requiring  enhanced  availability  of  information  on  shareholders, 
beneficial owners and nominees would also strengthen privacy and data protection rights, as 
the information obtained by covered institutions would come directly from the legal persons 
itself, rather than from potentially less trustworthy sources.   

VII.2.  Impacts on Small and Medium-Sized Enterprises (SMEs) 

The changes to the framework are expected to impact SMEs from two different perspectives: 

89  

See Option 13 in Annex III 

54 

 
 
 
 
                                                            
•  SMEs  which  are  gatekeepers  under  the  AML  framework  will  be  affected  by  the 
proposed changes: the most significant change is likely to be the enhancement of the 
risk-based approach, intended to lead to more effective allocation of resources within 
companies.    SMEs  operating  under  the  framework  (e.g.  small  offices  of  lawyers  or 
accountants,  independent  professionals,  and  smaller  financial  institutions,  etc.)  have 
frequently complained that AML/CFT rules have been designed with larger financial 
institutions in mind, and that they do not have adequate resources to conduct the same 
level of control as would, for example, a large multi-national bank. The enhanced use 
of  the  RBA  should  allow  focus  on  the  riskier  elements  of  business,  and  for  those 
involved in businesses where ML/TF risks can be proven to be lower, the compliance 
burden  with  AML  rules  should  be  lighter  than  for  those  businesses  working  with 
higher risk clients (where more thorough checking and monitoring may be required). 
In some cases, professional organisations can also play an important role to ease the 
burden  of  compliance,  through  the  provision  of  guidance,  organization  of  training 
courses, submitting law clarification notes, answering doubts in the application of the 
legislation, etc.90There can be significant cost advantages to be gained for SMEs from 
such approaches91. There will also be impacts stemming from, on the one hand, new 
rules  on  PEPs,  which  may  require  more  frequent  consultation  of  external  databases 
(however the costs associated with such checks should not be exaggerated – in the UK 
a query to a private database costs between £0.15 - £1.00, depending on the profile of 
the  customer),  and  on  the  other  hand,  from  the  enhanced  transparency  of  beneficial 
ownership  information  which  should  make  the  job  of  checking  on  beneficial 
ownership of clients easier. Traders in high value goods (e.g. jewellers, second hand 
car  dealers,  auction  houses,  etc.)  are  likely  to  be  affected  by  the  reduction  of  the 
threshold above which they become subject to the AML framework. Such persons will 
need to make a choice on whether to continue to accept cash above the lowered €7,500 
threshold and thus perform customer due diligence checks, or whether to decline such 
cash  transactions  and  request  settlement  by  other  means  of  payment.  As  compliance 
with  AML  rules  requires  knowledge  of  the  law,  staff  training  and  access  to  AML-
related information and data-bases, it is most probable that the large majority of SME's 
faced with such choices would opt for the latter option. 

•  SMEs which are not subject to AML requirements, but which will be affected by the 
proposed  changes:  the  controls  and  restrictions  which  result  from  the  existing 
preventative  framework  protect  businesses  from  the  risks  and  harmful  effects 
associated with money laundering and terrorist financing. The most significant change 
affecting  the  broader  business  community  will  be  the  introduction  of  rules  on 
enhancing  the  availability  of  beneficial  ownership  information.  The  requirement  on 
companies to hold information on their beneficial owners will shift some of the burden 
from  the  obliged  entities  onto  their  customers,  who  are  better  placed  to  provide 

90  

91  

Based on the survey conducted by the Deloitte study, this is the case for a number of national professional associations 
(notaries, bar associations, etc.). For example, in the case of Spanish notaries a centralised unit has been set up by the General 
Council of Notaries aimed at preventing and combating ML-FT by integrating and compiling information on transactions 
performed before all notaries and automating treatment of information (red flags, patterns, etc.). 

For example in the case of the UK Law Society, which acts as a self-regulatory body, assistance provided to firms to meet their 
obligations. They are in the process of developing an AML/CFT toolkit to complement their AML/CFT practice note. Such toolkits 
issued by the Law Society in other areas generally retail for £60 and should be able to be tailored to the firm within a day. Using 
the same approach as above, the cost incurred would be £240 plus £60 i.e. £300. There are about 8,500 firms of between 1 to 4 
partners giving a total cost of about £2.5m for that sector. 

55 

 
 
 
 
                                                            
information  about  their  ownership.  The  cost  impact  for  individual  firms  is  not 
expected  to  be  great,  however  with  an  estimated  23  million  SMEs  in  the  EU,  the 
cumulative  impacts  of  this  measure  risk  to  be  rather  significant.  No  major  other 
impacts from the changed rules are to be expected with respect to SMEs. 

VII.3.  Environmental impacts 

The environmental impact of the proposed changes is likely to be minimal.  

VII.4.  International aspects 

VII.4.1. 

International  Standards 

The FATF is recognised as the global standard-setter for AML and CFT.  Its recently revised 
40  Recommendations  set  out  the  international  framework  that  over  180  countries  globally 
(through  a  network  of  regional  bodies)  seek  to  implement.    They  form  the  basis  for  a  co-
ordinated response to potential threats to the integrity of the financial system and help ensure 
a level playing field.  The Recommendations set out the measures that countries should have 
in  place  within  their  criminal  justice  and  regulatory  systems;  the  preventive  measures  to  be 
taken  by  financial  institutions  and  other  businesses  and  professions;  measures  to  ensure 
transparency  on  the  ownership  of  legal  persons  and  arrangements;  the  establishment  of 
competent authorities with appropriate functions, and powers and mechanism for cooperation; 
and arrangements to cooperate with other countries. 

The  FATF  evaluates  the  progress  of  its  members  in  implementing  necessary  measures  and 
sets  remedial  action  if  it  deemed  appropriate.    In  collaboration  with  other  international 
stakeholders,  the  FATF  works  to  identify  national-level  vulnerabilities  with  the  aim  of 
protecting the international financial system from misuse. 

As a founder Member of the FATF, the European Commission participated in the process of 
revising the FATF Recommendations and has fully endorsed the revisions.  Given that all EU 
Member States will be subject to mutual evaluations conducted by either the FATF (of which 
15  Member  States  are  members)  or  Moneyval  (a  FATF-style  regional  body  of  which  12 
Member States are members), it is appropriate that changes to the Third AMLD be consistent 
with the new international standards.  

VII.4.2. 

Third Country Equivalence 

The  EU's  Third  Country  Equivalence  process  involves  an  assessment  of  countries  that  are 
deemed to have AML/CFT systems that are "equivalent" to those set out in the Third AML 
Directive.  Countries that are deemed to have "equivalent" systems are named in a list drawn 
up by representatives of Member States.  The grounds for inclusion in the list are set out in the 
"Common  Understanding"  drawn  up  by  representatives  from  Member  States.    Under  the 
Third AMLD equivalent status gave the possibility for obliged entities in EU Member States 
to  apply  reduced  measures  (for  example,  simplified  customer  due  diligence  measures)  in 
respect  of  financial  institutions  from  equivalent  third  countries.    It  appears  that  some  third 
countries  saw  inclusion  on  the  list  as  a  form  of  unofficial  endorsement  of  the  soundness  of 
their AML/CFT systems from the Member States.  The move towards a more risk-sensitive 
system, whilst maintaining some version of a list as an evidential factor of lower geographical 
risk  will  still  allow  comparison  of  the  quality  of  third  country  regimes  with  the  AML 
Directive and could make business with institutions in third countries easier (for example, by 
applying simplified customer due diligence measures). 

56 

 
 
 
 
VII.4.3. 

Competitiveness of EU 

Although  tougher  AML/CFT  measures  will  result  in  some  cost  burden  for  obliged  persons 
and entities, the EU should aim to have AML/CFT systems that are robust and that protect the 
integrity  of  the  financial  system  within  the  single  market.  This  should  increase  the 
attractiveness  of  conducting  legitimate  business  in  the  single  market  area  and  maintain 
confidence in the financial system by those that seek to use it for legitimate purposes. 

VIII.  OVERALL IMPACTS OF THE PACKAGE  

VIII.1. 

Impacts of the preferred policy options 

The  preferred  policy  options  outlined  in  this  impact  assessment  are  intended  to  address  the 
problems as outlined in the problem definition, i.e.: 

•  Adaptation  of  the  framework  in  order  to  adhere  to  recently  revised  international 

AML/CFT standards; 

•  Clarification of the rules so as to ensure consistent application throughout the EU, but 

in a way which ensures an appropriate degree of consistency; 

•  Ensuring that the rules appropriately address existing and newly emerging threats.  

While the negative implications of not having in place such systems are explored in various 
parts of this impact assessment, it is impossible to provide an accurate quantitative estimate of 
the benefits of having in place up-to-date, internationally compliant rules which are coherent 
across the Internal Market. The World Bank describes the benefits as follows: "..an effective 
framework for anti-money laundering (AML) and combating the financing of terrorism (CFT) 
have important benefits, both domestically and internationally, for a country. These benefits 
include lower levels of crime and corruption, enhanced stability of financial institutions and 
markets, positive impacts on economic development and reputation in the world community, 
enhanced risk management techniques for the country’s financial institutions, and increased 
market integrity."92 

The  adaptation  of  the  framework  to  stricter  international  standards,  coupled  with  the 
additional  changes  which  are  proposed  as  a  result  of  the  Commission's  own  review  process 
are expected to represent a substantial strengthening of the overall framework. The envisaged 
changes should mean that: 

•  a broader scope will address additional areas of risk,  

•  cross-border compliance should be strengthened  

•  greater coherence between national rules achieved,  

•  greater effectiveness should result from more targeted and risk-sensitive rules. 

In particular, the risk-based approach is not intended to lead to any lessening of standards, but 
on the contrary it calls for increased vigilance and its application should allow for the most 
significant AML/CFT risks to be more effectively targeted.  

92  

Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism Second Edition and Supplement on 
Special Recommendation IX, The World Bank/IMF, 2006. 

57 

 
 
 
 
  
                                                            
The FATF is increasingly focussing on the effectiveness of AML rules, as opposed to simple 
compliance.  New  ways  to  evaluate  the  national  implementation  of  standards  are  currently 
being  developed,  which  should  mean  that  there  will  be  increased  onus  on  competent 
authorities to demonstrate that their systems are really working and keeping money launderers 
and terrorists out of the system. 

The  preceding  sections  have  described  the  impacts  the  proposed  measures  are  expected  to 
have from a variety of different perspectives.  

In terms of cost impacts, it is clear that the implications will be very different according to 
the situation of various stakeholders. The most significant cost factors associated with AML 
compliance are those connected with initial one-off costs associated with the introduction of 
new systems, training, consultancy, etc. On the basis of a previous Commission study93, it is 
already clear that how high those costs are likely to be will very much depend on the type of 
strategy  adopted  to  ensure  compliance  (e.g.  focus  on  automated  processes,  as  opposed  to 
manual  processes).  It  will  also  depend  on  the  degree  of  AML/CFT  risk  associated  with  the 
nature  of  each  business.  Experience  in  the  financial  sector  suggests  that  one-off  AML 
compliance  costs  can  amount  to  as  much  as  10%  of  all  their  regulatory  compliance  costs, 
although caution is required when attempting to extrapolate such data to other obliged entities 
operating very diverse business models. It is not expected that existing obliged entities will be 
unduly impacted  by  the envisaged changes, as they have already made systems investments 
which should  be  relatively easily adapted without  the  need  for heavy new investments.  The 
same  cannot  however  be  concluded  with  respect  to  entities  who  were  hitherto  outside  the 
scope of the AML framework but who will need in future to apply AML/CFT rules. This is 
notably  the  case  in  the  gambling  sector,  where  in  a  number  of  Member  States  only 
"traditional" casinos are currently within the scope of national rules94. 

In  terms  of  impacts  on  Member  States'  AML  regimes,  the  fact  that  the  international 
standards have been applied and evaluated in all Member States, coupled with the fact that all 
EU  Member  States  have  fully  implemented  existing  EU  rules,  suggests  that  the  impact  of 
introducing  a  revised  set  of  internationally  agreed  rules  via  the  Commission's  proposals 
should  not  unduly  advantage  or  disadvantage  particular  Member  States.  The  quantity  and 
variety  of  changes  will  have  different  implications  for  the  modification  of  existing  legal 
frameworks at national level. Those frameworks have been conceived to function in different 
broader legal environments, and therefore the specific impacts in Member States are likely to 
differ accordingly. Some examples of different Member State approaches have been provided 
in this impact assessment (e.g. see Box 5 on the different approaches to the calculation of the 
25% beneficial ownership threshold, Table 5 on transactions for cash thresholds, Annex VIII 
comparing  EU  MS'  sanctions  and  penalties,  Annex  IX  on  EU  MS'  approaches  to  the 
regulation of the gambling sector). 

In  terms  of  other  impacts,  consideration  has  been  given  to  how  the  envisaged  measures 
would affect:  

•  Stakeholders – both those falling under the scope of the existing framework, and other 

stakeholders affected by the changed rules. 

93  

94  

Europe Economics: Study on the Cost of Compliance with Selected FSAP Measures, 5 January 2009. 

This is further explored in Annexes V.7 and IX. 

58 

 
 
 
 
                                                            
•  Fundamental rights, where it is particularly important to ensure an appropriate balance 
between  effectiveness  of  AML/CFT  measures  and  the  respect  to  data  protection  and 
privacy.  

•  SMEs, where a distinction is drawn between the impacts on SME's which fall under 

the scope of the AML/CFT framework, and the impacts on SME's in general. 

•  The environment – where no significant impacts are foreseen. 

•  The  international  dimension,  where  in  particular  the  current  approach  towards 
recognition  of  third  country  equivalence  needs  to  be  adapted  to  the  risk  based 
approach, which should consequently mean that in future geographical location will be 
just one factor in a broader assessment of ML/TF risks. 

In conclusion, the Commission considers that the proposed rule changes are proportionate to 
the  objectives.  By  ensuring  a  tailored  and  flexible  approach,  Member  States  should  not  be 
constrained  from  adopting  measures  and  taking  actions  as  necessary  to  counter  important 
threats they may confront at national level. The inclusion of processes at EU level to ensure 
greater coordination and the development of supranational approaches, together with further 
harmonisation  in  specific  areas  should  ensure  that  EU  objectives  are  also  met.    Although 
ensuring an effective AML/CFT system entails considerable costs for obliged entities (these 
costs have been analysed in Annex IV), the Commission considers that the (much harder to 
quantify)  benefits  associated  with  preventing  money  laundering  and  terrorist  financing  will 
continue to outweigh the costs, also the new costs arising from the changes to the framework. 

VIII.2.  Coherence with other EU initiatives 

The  proposed  adaptation  to  the  AML/CFT  framework  is  fully  coherent  with  EU  policies  in 
other areas, in particular: 

•  The  Stockholm  Programme95,  which  aims  at  achieving  an  open  and  secure  Europe 
serving and protecting citizens, calls on Member States and the Commission to further 
develop  information  exchange  between  the  FIUs,  in  the  fight  against  money 
laundering. 

•  The  EU's  Internal  Security  Strategy96  identifies  the  most  urgent  challenges  to  EU 
security  in  the  years  to  come  and  proposes  five  strategic  objectives  and  specific 
actions for 2011-2014 to help make the EU more secure. This includes tackling money 
laundering  and  preventing  terrorism.  The  need  to  update  the  EU  AML/CFT 
framework  with  a  view  to  enhancing  the  transparency  of  legal  persons  and  legal 
arrangements has been specifically recognised. 

• 

In March 2012,  the  European  Commission  adopted  a  proposal on the  freezing and 
confiscation  of proceeds of crime in  the  European  Union97 which seeks to  ensure 
that Member States have in place an efficient system to freeze, manage and confiscate 
criminal  assets,  backed  by  the  necessary  institutional  setup,  financial  and  human 
resources. 

95  

96  

97  

Official Journal of the European Union, C 115/1, 4.5.2010. 

Commission Communication: "The EU Internal Security Strategy in Action: Five steps towards a more secure Europe", COM 
(2010)673 final. 

Proposal for a Directive  on the freezing and confiscation of proceeds of crime in the European Union, COM(2012) 85 final 

59 

 
 
 
 
                                                            
•  With respect to data protection, the envisaged clarifications to the Third AMLD are 
fully  in  line  with  the  approach  set  out  in  the  Commission's  recent  data  protection 
proposals98. The Commission’s AML proposals will strengthen protection of personal 
data, by limiting the length of time and stipulating the conditions data can be retained 
by  obliged  entities,  and  will  clarify  the  conditions  under  which  transfers  to  third 
countries may take place.  

•  With  respect  to  sanctions,  the  proposal  to  introduce  a  set  of  minimum  principles-
based  rules  to  strengthen  administrative  sanctions  is  fully  in  line  with  the 
Commission's  policy  as  outlined  in  its  Communication  "Reinforcing  sanctioning 
regimes in the financial services sector"99. 

•  With respect to financial inclusion, the fact that applying an overly cautious approach 
to  AML/CFT  safeguards  might  have  the  unintended  consequence  of  excluding 
legitimate  businesses  and  consumers  from  the  financial  system  has  been  recognised. 
Work has been carried out on this issue at international level100 to provide guidance to 
provide  support  countries  and  their  financial  institutions  in  designing  AML/CFT 
measures that meet the national goal of financial inclusion, without compromising the 
measures  that  exist  for  the  purpose  of  combating  crime.  At  EU  level,  the  issue  of 
financial  inclusion  is  currently  under  consideration  as  part  of  the  work  on  a  Bank 
Accounts package. 

IX.  MONITORING AND EVALUATION  

The  Commission  is  the  guardian  of  the  Treaty  and  will  therefore  need  to  monitor  how 
Member  States  have  implemented  the  changes  to  the  Third  AMLD  and  the  FTR.    Where 
appropriate and on request, the Commission services will offer assistance to Member States, 
throughout the implementation period, for the implementation of the legislative changes in the 
form of transposition workshops with all the Member States or bilateral meetings. Wherever 
necessary, the Commission will follow the procedure set out in Article 258 of the Treaty in 
case  any  Member  State  fails  to  respect  its  duties  concerning  the  implementation  and 
application of Community Law.  

The Commission will work with the joint Committee of the European Supervisory Authorities 
on  AML  (AMLC),  which  in  particular  produces  reports  on  the  implementation  of  the  third 
AML  Directive  in  some  specific  areas101  in  order  to  monitor  the  application  of  the  new 
legislative framework. The Committee on the Prevention of Money Laundering and Terrorist 
Financing  (CPMLTF),  could  also  serve  as  a  forum  for  sharing  information  on  application 
issues.  The  Commission  services  may  also  use  the  findings  of  studies  carried  out  by 

98  

99  

100  

101  

See the Commission's data protection proposals (COM(2012) 11 final) and (COM(2012) 10 final). 
http://ec.europa.eu/justice/newsroom/data-protection/news/120125_en.htm 

Reinforcing sanctioning regimes in the financial services sector (COM(2010) 716 final) 

See "Anti-money laundering and terrorist financing measures and Financial Inclusion", FATF, June 2011 

See two AMLC reports of 11 April 2012 on the implementation of the third AML Directive. The “Report on the legal, regulatory 
and  supervisory  implementation  across  EU  Member  States  in  relation  to  the  Beneficial  Owners  Customer  Due  Diligence 
requirements” and the "Report on the legal and regulatory provisions and supervisory expectations across EU Member States of 
Simplified Due Diligence requirements where the customers are credit and financial institutions” provided an overview of the 
legal and supervision framework. 

60 

 
 
 
 
                                                            
stakeholders  or  Member  States  as  well  as  any  feedback  from  meetings  with  private 
stakeholders.  Consideration  will  also  be  given  to  commissioning  an  external  study  as 
appropriate102.  

Monitoring of the application of the AML Directive will also take place indirectly through the 
mutual evaluation processes of the FATF (15 EU Member States are members of this body) as 
well as Moneyval (the other 12 Member States are members of this body). This peer review 
process103 is an essential and rigorous process to ensure that Member States comply, both in 
law and in practice, with FATF international standards, from which most of the requirements 
of  the  AML  Directive  are  derived.  Evaluations  take  place  around  every  5-7  years  for  each 
country  and  can  be  complemented  by  follow-up  reports,  usually  every  2  years  (or  more 
frequently if the deficiencies identified require it). The FATF is placing increased emphasis 
on  the  assessment  of  effectiveness  of  measures,  as  opposed  to  compliant  legal  frameworks. 
The mutual evaluations concerning individual EU Member States will represent an important 
element for the Commission's own evaluation of the effectiveness of the legal framework. 

As  these  monitoring  options  would  make  use  of  the  existing  European  or  International 
structures and would not require the setting up of a new instrument, they would entail limited 
cost at EU level.   

As  regards  progress  indicators  for  the  key  objectives,  good  ratings  in  FATF  or  Moneyval 
reports on EU Member States would be indicators of the consistency of the EU approach with 
international  standards  and  of  the  preservation  of  the  EU  financial  system's  reputation.  The 
number  of  suspicious  transaction  reports,  investigations,  prosecutions  or  sentences  in  the 
different  Member  States,  compared  to  those  of  the  previous  years,  can  also  constitute  a 
starting point to measure progress in effectiveness of the system against ML/FT104.  

Efforts to monitor effectiveness through the compilation of data at EU level have been made 
by the Commission, and are described in Annex VII.  

Reports produced by the AMLC can also be excellent indicators of the state of coherence of 
AML  legislation  and  supervisory  implementation  across  Member  States  in  some  specific 
areas105.  

An ex-post evaluation of the application of the revised Directive should take place after the 
entry into force of the legislative measure in the form of a Commission report to the Council 
and the European Parliament106.  

102  

103  

104  

105  

106  

Such a study was commissioned in order to assess the application of the current  Directive : Final Study on the Application of the 
Anti-Money Laundering Directive, Deloitte, December 2010 

Further explained in section III.4.1 

These statistical indicators need to be treated with caution as they can also mean an increase in criminal activity or increased 
resources within the police, judicial or supervisory bodies.   

The two AMLC reports of 11 April 2012 above-mentioned sought to identify differences in the implementation of the Directive. 

It will be important to set an appropriate timeframe for the production of such a report, as the period of 4 years following the 
adoption of the Third AMLD to evaluate the application of the Directive proved to be too short to obtain qualitative and 
quantitative information about the impact of the Directive in all areas concerned 

61 

 
 
 
 
 
                                                            
X.  ANNEXES  

ANNEX I:  GLOSSARY 

Anti-Money 
Committee (AMLC) 

Laundering 

Article  29  Working  Party  on 
Data Protection 

Beneficial Owner 

the  European  Supervisory 
The  Joint  Committee  of 
Authorities´  Sub  Committee  on  Anti-Money  Laundering 
(AML Committee, AMLC) assists the European Supervisory 
Authorities in a supervisory capacity, to ensure a consistent 
implementation of the EU law. 

The Article 29 Working Party was set up under Article 29 of 
Directive 95/46/EC. It is an independent European advisory 
body on data protection and privacy. Its tasks are described 
in  Article  30  of  Directive  95/46/EC  and  Article  15  of 
Directive 2002/58/EC. 

Article 3(6) of the Third AMLD defines “beneficial owner” 
as the natural person(s) who ultimately owns or controls the 
customer  and/or  the  natural  person  on  whose  behalf  a 
transaction or activity is being conducted. 

Committee  for  the  Prevention 
of  Money  Laundering  and 
Terrorist 
Financing 
(CPMLTF) 

Established by Article 41 of the Third AMLD, the role of the 
CPMLTF,  made  up  of  designated  Member  States 
representatives as well as a number of observers, is to assist 
the Commission in the development of AML/CFT policy. 

Customer  Due  Diligence 
(CDD) 

Deloitte study 

Designated  Non  Financial 
Businesses  and  Professions 
(DNFBPs) 

Customer  Due  Diligence  is  described  in  Chapter  II  of  the 
third AMLD. The "regular" level of CDD imposes a duty on 
the obliged entity to identify and verify their customers and 
customers' beneficial owners, to understand the purpose and 
nature  of  the  business  relationship  as  well  as  to  conduct 
ongoing monitoring. 

A  Study  on  the  Application  of  the  Anti-Money  Laundering 
Directive carried out on behalf of the European Commission 
(DG Internal Market and Services): 

http://ec.europa.eu/internal_market/company/docs/financial-
crime/20110124_study_amld_en.pdf 

Those  entities  which  are  not  credit  or  financial  institutions 
but which fall under the scope of the Third AMLD, i.e.:  

•  Auditors 
•  External accountants 
•  Tax advisors 
•  Notaries  and 

Independent 

legal  professionals 

(involved in transactions) 

•  Trust or company service providers 
•  Real estate agents 
62 

 
 
 
 
Egmont Group 

•  Casinos 
•  Other  natural/legal  persons  trading  in  goods  when 

cash payments <€15,000 

The  Egmont  Group  of  Financial  Intelligence  Units  is  an 
informal  international  gathering  of  financial  intelligence 
units (FIUs). The goal of the Egmont Group is to provide a 
forum for FIUs around the world to improve cooperation in 
the  fight  against  money  laundering  and  financing  of 
terrorism  and  to  foster  the  implementation  of  domestic 
programs in this field. 

Enhanced  Due  Diligence 
(EDD) 

In the case of EDD, the obliged entity must take a number of 
prescribed further customer due diligence steps, albeit on a 
risk-sensitive basis. 

European 
Authorities (ESAs) 

Supervisory 

•  European Securities and Markets Authority (ESMA) 

•  European Banking Authority (EBA) 

•  European  Insurance  and  Occupational  Pensions 

Authority (EIOPA). 

Set up in January 2011, the ESAs are tasked with financial 
the  EU 
stability  and  strengthening  and  enhancing 
supervisory framework.  

Jointly they are responsible for the Anti-Money Laundering 
Committee (see separate explanation) 

FATF fourth round evaluation 
process 

The  FATF  conducts  evaluations  of  its  members,  and 
completed  the  third  round  of  these  mutual  evaluations  in 
2011.  The fourth round is expected to commence in 2013. 

Financial  Action  Task  Force 
(FATF) 

An  inter-governmental  body  established  in  1989  by  the 
Ministers  of  its  Member  jurisdictions  and  organisations.  
The objectives of the FATF are to set standards and promote 
effective implementation of legal, regulatory and operational 
measures 
terrorist 
financing  and  other  related  threats  to  the  integrity  of  the 
international financial system.   

for  combating  money 

laundering, 

Financial 
(FIU) 

Intelligence  Unit 

FIU Platform 

Article 21 of the Third AMLD requires the establishment of 
an  FIU  which  serves  as  a  national  centre  for  receiving, 
analysing  and  disseminating  to  the  competent  authorities 
suspicious 
information 
transaction  reports  and  other 
regarding potential money laundering or terrorist financing. 

The “EU Financial Intelligence Units’ Platform” was set up 
in  2006  by  the  European  Commission.  It  gathers  Financial 
Intelligence Units from the Member States. Its main purpose 

63 

 
 
 
 
Internal Security Strategy 

Legal arrangements 

Legal persons 

is to facilitate cooperation among the FIUs. 

The  EU's  Internal  Security  Strategy  identifies  the  most 
urgent  challenges  to  EU  security  in  the  years  to  come  and 
proposes  five  strategic  objectives  and  specific  actions  for 
2011-2014 to help make the EU more secure. This includes 
tackling money laundering and preventing terrorism.  

According to the FATF definition, legal arrangements refer 
to  express  trusts  or  other  similar  legal  arrangements. 
Examples  of  other  similar  arrangements  (for  AML/CFT 
purposes) include fiducie, treuhand and fideicomiso. 

Any entities other than natural persons that can establish a 
permanent customer relationship with a financial institution 
or  otherwise  own  property.    This  can  include  companies, 
bodies  corporate,  foundations,  Anstalt,  partnerships,  or 
associations and other relevant similar activities. 

Money Laundering (ML) 

Money laundering is defined in the Third AMLD as follows:  

The  following  conduct,  when  committed  intentionally,  shall 
be regarded as money laundering: 

(a) the conversion or transfer of property, knowing that such 
property is derived from criminal activity or from an act of 
participation in such activity, for the purpose of concealing 
or disguising the illicit origin of the property or of assisting 
any  person  who  is  involved  in  the  commission  of  such 
activity to evade the legal consequences of his action; 

(b)  the  concealment  or  disguise  of  the  true  nature,  source, 
location,  disposition,  movement,  rights  with  respect  to,  or 
ownership  of  property,  knowing  that  such  property  is 
derived from criminal activity or from an act of participation 
in such activity; 

(c)  the  acquisition,  possession  or  use  of  property,  knowing, 
at  the  time  of  receipt,  that  such  property  was  derived  from 
criminal  activity  or  from  an  act  of  participation  in  such 
activity; 

(d)  participation  in,  association  to  commit,  attempts  to 
commit and aiding, abetting, facilitating and counselling the 
commission of any of the actions mentioned in the foregoing 
points. 

Committee  of  Experts  on  the  Evaluation  of  Anti-Money 
Laundering  Measures  and  the  Financing  of  Terrorism. 
Moneyval  currently  comprises  30  members  which  are 
subject to its evaluation processes and procedures, including 
the 12 EU Member States which are not members of FATF. 

64 

Moneyval 

 
 
 
 
The aim of Moneyval is to ensure that its member states have 
in  place  effective  systems  to  counter  money  laundering  and 
terrorist 
relevant 
international standards in these fields. 

financing  and  comply  with 

the 

Obliged entities and persons  

Payment  Service  Provider 
(PSP) 

Politically  Exposed  Person 
(PEP) 

Predicate offence 

Risk Based Approach (RBA) 

Article  2  of  the  Third  AMLD  imposes  obligations  on 
financial  institutions,  auditors,  external  accountants,  tax 
advisors,  notaries  and  other  legal  professionals  (when 
participating  in  any  financial  or  real  estate  transaction), 
trust  or  company  service  providers,  real  estate  agents  and 
casinos. There is also an obligation on other natural or legal 
persons  trading  in  goods  where  payment  is  made  in  cash 
equal to or above €15,000. 

As  defined  in  Art  4(9)  of  Directive  2007/64/EC  (the 
"Payment  Services  Directive"),  i.e.  credit  institutions,  E-
Money  institutions,  post  office  giro  institutions  providing 
payment  services,  payment  institutions,  European  Central 
Banks and national Central Banks when not acting in their 
capacity  as  monetary  or  other  public  authorities,  Member 
States or their regional or local authorities when not acting 
in their capacity as public authorities. 

The  Third  AMLD  defines  “politically  exposed  persons”  as 
natural  persons  who  are  or  have  been  entrusted  with 
prominent  public  functions  and  immediate  family  members, 
or persons known to be close associates, of such persons. 

Are  serious  crimes  as  described  in  Art.  3(5)  of  the  Third 
AMLD.  The  listed  categories  of  crimes  are  those  for  which 
transformation of the proceeds are considered to give rise to 
money laundering. 

Under  the  revised  FATF  recommendations,  the  risk-based 
approach allows countries and obliged entities and persons 
to adopt a more flexible set of measures in order to comply 
with  certain  Recommendations.  This  helps  them  to  target 
their  resources  more  effectively  and  apply  preventive 
measures  that  are  commensurate  to  the  nature  of  risks,  in 
order to focus their efforts in the most effective way. 

Simplified  Due  Diligence 
(SDD) 

SDD  permits  obliged  entities  to  perform  reduced  customer 
due  diligence  measures  for  certain  types  of  customer  or 
business. 

Suspicious 
Reports (STRs) 

Transaction 

A disclosure made to a Financial Intelligence Unit (FIU) by 
an  obliged  entity  or  competent  authority    having  an 
obligation to disclose based on the  suspicion or reasonable 
grounds  to  suspect  that  money  laundering  or  terrorist 

65 

 
 
 
 
Terrorist Financing (TF) 

Trust  and  Company  Service 
Providers (TCSPs) 

financing is being or has been committed or attempted. 

Terrorist  financing  means  the  provision  or  collection  of 
funds, by any means, directly or indirectly, with the intention 
that they should be used or in the knowledge that they are to 
be  used,  in  full  or  in  part,  in  order  to  carry  out  any  of  the 
offences  within  the  meaning  of  Articles  1  to  4  of  Council 
Framework  Decision  2002/475/JHA  of  13  June  2002  on 
combating  terrorism  as  amended  by  Council  Framework 
Decision 2008/919/JHA. 

As defined in Art. 3(7) of the Third AMLD: 
"Any  natural  or  legal  person  which  by  way  of  business 
provides any of the following services to third parties: 
(a) forming companies or other legal persons; 
(b)  acting  as  or  arranging  for  another  person  to  act  as  a 
director  or  secretary  of  a  company,  a  partner  of  a 
partnership,  or  a  similar  position  in  relation  to  other  legal 
persons; 
(c)  providing  a  registered  office,  business  address, 
correspondence or administrative address and other related 
services for a company, a partnership or any 
other legal person or arrangement; 
(d)  acting  as  or  arranging  for  another  person  to  act  as  a 
trustee of an express trust or a similar legal arrangement; 
(e)  acting  as  or  arranging  for  another  person  to  act  as  a 
nominee  shareholder  for  another  person  other  than  a 
company  listed  on  a  regulated  market  that  is  subject  to 
disclosure  requirements  in  conformity  with  Community 
legislation or subject to equivalent international standards;" 

66 

 
 
 
 
ANNEX II:  THE DEVELOPMENT OF EU AND INTERNATIONAL POLICIES TO COMBAT 

MONEY LAUNDERING AND TERRORIST FINANCING 

At  international  level,  the  FATF  has  developed  a  series  of  Recommendations  that  are 
recognised as the international standard for combating of money laundering and the financing 
of  terrorism.    The  FATF  Recommendations  were  first  issued  in  1990,  and  revised  in  1996, 
2001,  2003  and  most  recently  in  2012,  after  an  extensive  process  involving  experts  from 
members, to ensure that they remain up to date and relevant. 

The  FATF  monitors  the  progress  of  its  members  in  implementing  necessary  measures, 
reviews  money  laundering  and  terrorist  financing  techniques  and  counter-measures,  and 
promotes  the  adoption  and  implementation  of  appropriate  measures  worldwide.    The  FATF 
has completed the third round of mutual evaluations of its members, and will commence the 
fourth round of mutual evaluations at the end of 2013.  The results of these assessments are 
made public and any short-comings identified in the reports are subject to a rigorous follow-
up process.  

The  G20  has  recognised  and  endorsed  the  revision  of  the  FATF  Recommendations  and  the 
work of the FATF. 

In  the  EU,  there  has  been  a  progressive  introduction  of  rules  to  establish  a  preventative 
framework designed to protect the financial system.  

The first elements of the EU Anti-Money Laundering framework were  put in place through 
the adoption of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the 
financial system for the purpose of money laundering. It required Member States to prohibit 
money laundering and to oblige the financial sector, comprising credit institutions and a wide 
range  of  other  financial  institutions,  to  identify  their  customers,  keep  appropriate  records, 
establish internal procedures to train staff and guard against money laundering and to report 
any  indications  of  money  laundering  to  the  competent  authorities.  The  financial  sector  has 
progressively  implemented  AML  regimes,  and  now  files  by  far  the  largest  number  of 
suspicious transaction reports to Financial Intelligence Units (see Table 2 in section III.3.2).  

Over the years, the rules have been reinforced.  

The Second Anti Money Laundering Directive (2001/97/EC): 

•  Clarified  to  which  national  authorities  suspicious  transaction  reports  from  foreign 

branches of credit and financial institutions should be sent; 

•  Clarified  the  scope  of  obliged  entities  by  confirming  the  inclusion  of  bureaux  de 

change, money transmitters and the activities of investment firms; 

•  Expanded the scope of  predicate offences to bring it in line with  the  1996  FATF  40 

recommendations; 

•  Extended  the  Directive's  obligations  concerning  customer  identification,  record 
keeping and the reporting of suspicious transactions to notaries and independent legal 
professionals when participating in financial or corporate transactions, whilst allowing 
bar  associations  or  the  self  regulatory  bodies  to  receive  reports  for  possible  onward 
transmission to authorities responsible for combating money laundering. 

The  Third  Anti  Money  Laundering  Directive  (2005/60/EC)  updated  the  EU  framework  in 
light of the expanded FATF standards, which had been revised in 2003. The new provisions: 

67 

 
 
 
 
•  Brought the definition of serious crime into line with the definition of serious crime in 
Council  Framework  Decision  2001/500/JHA  of  26  June  2001  on  money  laundering, 
the  identification,  tracing,  freezing,  seizing  and  confiscation  of  instrumentalities  and 
the proceeds of crime. 

•  Extended the preventive measures to the collection of money or property for terrorist 

purposes; 

• 

Introduced  more  specific  and  detailed  provisions  relating  to  the  identification  of  the 
customer and of any beneficial owner and the verification of their identity; 

•  Clarified that the obligations from the Directive also applied to activities performed on 

the Internet; 

•  Extended  the  scope  of  the  Directive  to  cover  life  insurance  intermediaries  and  trust 

and company service providers 

In addition to these developments, the AML/CFT framework is completed by a number of 
EU instruments: 

•  Directive  2006/70/EC  (the  "implementing  Directive")  lays  down  implementing 
measures  for  Directive  2005/60/EC  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. 

•  Regulation 1781/2006 on information on the payer accompanying transfers of funds: 
the  Regulation  requires  information  on  the  payer  to  accompany  transfers  of  funds, 
with  the  objective  of  ensuring  prevention,  investigation  and  detection  of  money 
laundering and terrorist financing. The Regulation covers all types of funds transfers 
carried out by electronic means in any currency, from a payer to a payee, which are 
sent or received by a Payment Service Provider (PSP) established in the EU (Art. 3.1). 
This  is  in  order  to  make  it  easier  for  law  enforcement  authorities  to  track  funds 
transferred electronically by terrorists and criminals. 

•  Regulation 1889/2005 on controls of cash entering or leaving the Community places 
an obligation on any natural person entering or leaving the EU and carrying cash of a 
value  of  €10,000  or  more  to  declare  that  sum  to  the  competent  authorities.  The 
regulation only covers currency and excludes gold or precious metals. In the event of 
failure  to  comply  with  the  obligation  to  declare,  cash  may  be  detained  by 
administrative decision in accordance with national legislation. 

•  Council Decision 2000/642/JHA introduces arrangements to facilitate the cooperation 
of exchanging information between FIUs in the Member States. The Decision seeks to 
address  the  difficulties  in  communication  and  exchange  of  information  among  FIUs 
that  result  from  existing  different  legal  status  (administrative,  judicial  or  law 
enforcement  based)  and  providing  for  direct  communication  between  them.  The 
Decision reflects the standards and principles established by the Egmont Group107 as 
well as the recommendations of the FATF. 

107  

The goal of the Egmont Group is to provide a forum for FIUs around the world to improve cooperation in the fight against 
money laundering and financing of terrorism and to foster the implementation of domestic programs in this field 

68 

 
 
 
 
                                                            
•  Council  Framework Decision 2001/500/JHA seeks to implement concrete steps on 
money  laundering,  the  identification,  tracing,  freezing,  seizing  and  confiscation  of 
instrumentalities and the proceeds of  crime. Member States are  also required to take 
necessary steps to ensure that all requests from other Member States, related to asset 
identification,  tracing,  freezing  or  seizing  and  confiscation,  are  processed  with  the 
same priority given to domestic proceedings.108

•  Council  Framework  Decision  2002/475/JHA  of  13  June  2001  on  combating 
terrorism    which  urges  EU  Member  States  to  align  their  legislation  and  setting  out 
minimum  rules  on  terrorist  offences.  After  defining  such  terrorist  offences,  the 
framework  decision  lays  down  the  penalties  that  EU  countries  must  incorporate  in 
their national legislation. 

108  

In March 2012, the European Commission took steps to update this framework by adopting a proposal on the freezing and 
confiscation of proceeds of crime in the European Union. The proposal seeks to ensure that Member States have in place an 
efficient system to freeze, manage and confiscate criminal assets, backed by the necessary institutional setup, financial and 
human resources (see Proposal for a Directive  on the freezing and confiscation of proceeds of crime in the European Union, 
COM(2012) 85 final). 

69 

 
 
 
 
  
                                                            
ANNEX III:  DETAILED ASSESSMENT OF POLICY OPTIONS 

The following tables set out policy options in a number of specific areas where  operational 
objectives have been identified in section IV. In many cases, the operational objectives may 
address two or more of the problem drivers. However for the sake of avoiding repetition, the 
operational objectives are analysed under only one heading, on the understanding that certain 
options may also address other problem drivers. 

I.  Policy  Options  relating  to  Operational  Objective  1  (Ensure  that  the  EU  approach  is 
consistent  with  the  approach  followed  at  international  level  by  extending  the  scope  of 
application, strengthening and clarifying current requirements).  

1.  Tax Crimes: inclusion of tax crimes in the scope  

Policy options 

Comparison criteria 

1. No change 

2. General reference to 
tax crimes in the 
Directive, but without 
precise definition 

Effectiveness 

Efficiency 

Coherence 

0 

0 

0 

0 

0 

0 

+  Clear signal 

+ Some degree of convergence 

+ In line with Operational Objective 
1 

+ Partially in line with Operational 
Objective 2 

- Risk of incoherent MS approaches 

+ Some convergence will 
improve certainty 

+ Coherent with policies 
aimed at reinforcing the 
fight against tax fraud and 
tax evasion 

- Still some incoherence 
across MS risks burdens 
for cross-border business 

 3. Make tax crimes a 
specific predicate 
offence and detail the 
circumstances in which 
the offence is committed 

+ Clear signal 

+ Coherence across MS  

+ More efficient for 
cross-border business 

+ In line with Operational Objective 
1 

+ Partially in line with Operational 
Objective 2 

+ Coherent with policies 
aimed at reinforcing the 
fight against tax fraud and 
tax evasion 

- lack of flexibility may create 
vulnerabilities 

- Substantial difficulties 
to agree a common 
definition 

- Risk to delay agreement 
on the full package 

The revised international standards require that AML/CFT regimes incorporate "tax crimes" 
as a new predicate offence to money laundering. No further definition is given as to what "tax 
crimes" should mean. Three options are considered:  

1.  No change: this option would entail no additional cost and possibly be easy to agree 
politically.  Given  the  existing  "all  serious  crimes"  approach  in  the  current 

70 

 
 
 
 
 
 
 
 
Directive109, it could be argued that the existing approach in the Directive is already 
compliant  with  the  new  international  standard.  However  such  an  approach  might 
come  at  the  cost  of  coherence  between  EU  approaches  on  tax  crimes,  and  the 
absence of explicit reference to tax crimes in the Directive might call into question 
whether the EU framework was really fully compliant with international standards. 

2.  Include  a  general  reference  to  tax  crimes  in  the  Directive,  but  without  a  precise 
definition: this option would entail including a specific reference to tax crimes as a 
predicate offence. By using the existing threshold approach in the Directive (it is a 
serious  crime  if  it  is  punishable  by  at  least  a  maximum  penalty  of  one  year  of 
deprivation  of  liberty),  a  degree  of  consistency  across  Member  States  would  be 
achieved,  although  differences  across  jurisdictions  would  still  remain  –  as  is  the 
case  in  most  matters  involving  fiscal  harmonisation.  It  would  comply  with  the 
international standards and send a clear signal with respect to tax crimes. 

3.   Make tax crimes a specific predicate offence and detail the circumstances in which 
the offence is committed: this would be the optimal option with respect to meeting 
Internal Market goals. It would however go beyond the first operational objective 
of  ensuring  consistency  with  international  standards,  and  would  not  be  fully 
consistent  with  the  second  operational  objective  given  the  limited  flexibility.  It 
would potentially come at the cost of substantial delays due to political difficulties 
to agree on a common list of types of tax evasion behaviour which would need to 
be  included.  Such  problems  would  risk  jeopardising  agreement  on  the  broader 
AML/CFT  legislative  package,  and  compromise  efforts  to  align  the  framework 
with international standards ahead of the FATF's Fourth Round evaluation process. 

Stakeholders' views 

The majority of stakeholders favoured explicit coverage of tax crimes, viewing this either as 
necessary, or not interfering with their national legislation (where the "all crimes approach" 
has already been introduced).  Only around a quarter of respondents who expressed a view on 
this topic considered the existing provision to be sufficient.  Almost all of these stakeholders  
would nevertheless support the inclusion of tax crimes as a predicate offence on condition that 
the definition was limited to "serious" tax crimes, possibly by applying a threshold, and that 
errors  e.g.  in  completing  tax  compliance  steps,  as  well  as  legitimate  tax  planning  activities 
would not be included. 

Conclusion 

In  view  of  the  need  to  more  clearly  reflect  tax  crimes  in  the  EU  framework,  but  given  the 
significant  obstacles  that  would  be  faced  with  respect  to  securing  agreement  on  a  precise 
definition, the Commission has a clear preference for option 2, which although not achieving 
full  consistency,  will  nevertheless  achieve  a  degree  of  coherence  between  Member  State 
approaches. 

109  

Article 3.5 of the Third AMLD sets out a range of serious crimes that are considered to be criminal activities, and includes a 
general provision with respect to all other offences which carry a punishment imprisonment based on a maximum/minimum 
threshold 

71 

 
 
 
 
                                                            
2.  National Risk Assessments: Strengthen the requirement on Member States to 

identify assess, understand and mitigate ML/TF risks 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Introduce requirement for 
MS to carry out risk 
assessment, with option for 
supranational risk assessments 
in areas to be determined by EC 
(e.g. by AMLC, FIU platform, 
Europol). 

+ Meets the objective 

+ Each MS able to 
concentrate on their own 
risks 

+ Flexibility allows MS 
some regional divergence 

+ Can use national risk 
assessments to feed into 
EU-wide assessments as 
the concept matures 

- Costly supra-national 
elements 

+ Use of supranational 
assessments brings 
convergence and 
contributes to the Internal 
Market 

- Could be some 
fragmentation if each MS 
uses a different 
methodology 

3. Introduce prescriptive set of 
measures to: 

•  Carry out supranational risk 
assessment at EU level 

•  Take specified action to 

mitigate risks at EU level 

+ Meets objective 

+Obliged entities have 
certainty 

+ Greater convergence 

- Unless done 
comprehensively and 
regularly, could result in 
missing the objective 

- Very costly supra-
national risk assessment 
required 

- Needs to be kept up to 
date = resource intensive 

- Single approach not 
flexible 

- Mandating action to be 
taken could lead to 
competitive disadvantage 
for the single market  

The new FATF standards broaden the application of the RBA. At national level, countries are 
obliged  to  identify,  assess  and  understand  ML/TF  risks,  and  to  apply  resources  to  mitigate 
those risks.  Countries need to ensure that higher  risks  are  identified  and  mitigated,  but  may 
permit simplified measures for certain requirements when lower risk has been identified. The 
FATF acknowledges that AML/CFT risk assessments at a supranational level should be taken 
into  account.  Three  options  on  how  to  reflect  the  need  for  national/supranational  risk 
assessments are considered: 

1.  No  change:  this  option  would  entail  no  additional  cost.  However,  as  the  existing 
EU  rules  contain  very  little  about  the  need  to  understand  and  mitigate  risks,  it 
would leave the EU framework out of compliance with the international standards, 
and would likely result in different approaches being followed by Member States. 

2.  Introduce a new requirement in the Directive for Member States to carry out risk 
assessments at national level and take measures to mitigate risks, and introducing 
the  possibility  for  supranational  risk  assessments  to  be  undertaken  in  areas  to  be 
determined, based on detailed work to be undertaken at EU level (e.g. by AMLC, 
FIU  Platform,  Europol).  Coordination  could  be  provided  at  EU  level,  and 
supranational  approaches  developed  at  EU  level  derived  from  the  national  risk 
assessments, in areas where risk factors common to the EU as a whole have been 

72 

 
 
 
 
 
  
identified.  This  option,  which  recognises  the  fact  that  ML/TF  risks  facing 
jurisdictions are not always the same and need to be individually assessed, would 
meet  the  objective  of  strengthening  the  requirement  to  carry  out  national  risk 
assessments. The approach would be fully in line with international standards, and 
would also recognise the specific supranational character of the European Union. 
However  it  would  not  achieve  full  convergence  between  Member  States'  risk 
assessments. 

3.  Introduce  a  prescriptive  set  of  measures  to  carry  out  a  supranational  risk 
assessment  at  EU  level  and  prescribe  specified  actions  to  mitigate  risks  at  EU 
level: this option would treat the EU as a single jurisdiction, and would result in 
greater convergence between Member States' approaches. However it also carries 
a risk of missing the objective if the supranational risk assessment is incomplete or 
not updated regularly, and would be resource intensive and costly at EU level. Any 
inflexibility resulting from such  an  approach  might expose the EU  framework to 
criticism  from  international  standard  setters  that  risks  were  not  being  adequately 
and appropriately assessed. 

Stakeholders' views 

Stakeholders expressed strong support for the idea of broadening the application of the RBA.  
There  was  strong  support  amongst  almost  all  respondents  (public  authorities,  private  sector 
and civil society stakeholders) who agreed with the general approach.  Different views were 
however expressed as regards the usefulness of a complementary supranational assessment of 
the risk.  Whereas a significant majority of public authorities were in favour, only a minority 
of  respondents  from  the  business  segment  supported  such  an  idea.    Most  of  the  respondent 
companies  and  business  federations  expressed  a  preference  for  sufficient  independence  and 
flexibility  to  assess  their  own  ML/FT  risk,  which  would  allow  them  to  tailor  adequate 
procedures taking into account the characteristics of the specific sector/product concerned. 

Conclusion 

In view of the need that risks will first and foremost need to be identified at national level, and 
in  light  of  the  complexities  and  inflexibility  associated  with  a  single  EU  supranational  risk 
assessment, the Commission has a clear preference for option 2. 

73 

 
 
 
 
 
 
3a. Customer  Due  Diligence  (risk  based  approach):  Clarify  when  obliged 
entities must apply EDD and when they may apply SDD. 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0  

0 

0 

0 

2. MS to ensure that EDD is 
conducted, with the option 
of allowing SDD to be 
conducted.  Examples given 
of the risk factors to be 
taken into account. 

+ Targeted approach to risk 

+ Allows flexibility to 
respond to emerging threats 

+ Targeted approach to 
dealing with risks will 
result in better mitigation  

+ More cost-effective and 
efficient allocation of 
resources 

+ Issuance of guidelines by 
ESAs will represent  a 
cross-EU solution to an 
existing problem  

3. Prescriptive measures 
specifying when to carry 
out SDD and EDD and 
what measures to take. 

- Could be differences of 
interpretation 

- Possible short-term costs 
of implementing systems 

- Possible differential use of 
risk factors will give 
different risk profiles 
amongst obliged entities in 
different MS. 

+ Gives a consistent 
approach in the Directive 

+ Some level of certainty 

+ Arguably ensures a single 
approach 

- Solution does not target 
the risks involved, and thus 
the objective is not met in 
the longer-term 

- Does not target risk 

- Would require a 
resource-intensive EU-
wide risk assessment. 

- Resources of obliged 
entities could be spent on 
the wrong risks 

- Need a full supra-national 
assessment of ML/TF risks 
in the EU 

The current AML Directive recognises that enhanced and simplified CDD should be carried 
out  in  certain  specified  situations.    However,  the  approach  to  simplified  CDD  has  led  to 
criticism in mutual evaluation reports of Member States, where the assessors interpreted the 
measures as requiring no CDD, as opposed to reduced CDD measures.   The revisions to the 
FATF  standards  develop  categories  of  risk  factor  that  should  be  taken  into  account  in 
determining whether enhanced CDD should be carried out, and whether simplified CDD may 
be carried out.  Three options are considered: 

1.  No  change  to  the  existing  Directive:  this  option  would  not  properly  address  the 
deficiencies found in evaluation reports of Member States and would result in poor 
compliance ratings for MS going forward.  In addition, the prescriptive measures 
are  not  commensurate  to  the  risks  posed,  and  thus  are  ineffective,  with  obliged 
entities having to channel resources to areas without commensurate risks. 

2.  An  obligation  on  Member  States  to  ensure  that  enhanced  CDD  is  carried  out  in 
areas  of  high  risk  and  an  option  for  Member  States  to  allow  simplified  CDD  in 
lower  risk  situations,  with  examples  of  the  factors  to  be  considered  (such  as 
geography,  customer  type,  delivery  channel  etc.)  would  be  a  proportionate  and 
flexible solution, allowing a targeted response to potential risks.  In addition, this 
approach  is  in  line  with  the  greater  emphasis  on  risk  and  the  results  of  risk 

74 

 
 
 
 
  
assessments that the revised FATF standards require. To address Internal Market 
concerns  caused  by  the  proliferation  of  different  national  approaches,  work  will 
need to be carried out by the ESAs in order to issue guidelines to Member States 
on risk factors. 

3.  A  prescriptive  listing  of  when  to  apply  EDD  and  when  SDD  may  be  applied, 
accompanied by specific measures that must be taken would give some degree of 
certainty  to  the  process,  but  would  not  be  flexible  enough  to  deal  with  the 
changing nature of ML/TF risks.  In particular, the EU would need to carry out a 
thorough risk assessment across all Member States, and keep this up to date on an 
ongoing  basis.    This  would  be  both  costly  and  time-consuming,  and  would  not 
give Member States an opportunity to respond to specific risks that they might be 
facing, even on a short-term basis. 

Stakeholders' views 

There was strong support for the idea that a more focussed and risk-targeted approach should 
apply with respect to EDD and SDD measures.  The support was even stronger as regards the 
usefulness of establishing guidance on the application of such provisions.  On the other hand, 
some  companies  and  business  federations  were  concerned  that  any  clarification  in  the 
Directive  should  neither  be  exhaustive  nor  automatically  lead  to  the  assumption  of  ML/TF 
risks.  In particular, these stakeholders pointed out the dangers of an overly rigid regime given 
the speed of innovation in some sectors (e.g. the payment sector) and the variety of products 
available.  

Conclusion 

In  view  of  the  need  to  tailor  approaches  to  the  specific  risks  on  the  basis  of  different  risk 
factors,  and  to  maintain  an  appropriate  level  of  flexibility  so  as  to  be  able  to  respond  to 
emerging  threats,  and  given  that  a  targeted  approach  to  risk  allows  more  cost  effective 
allocation of resources the Commission has a clear preference for option 2. The issuance of 
guidelines on risk factors by the ESAs will be an important element in promoting coherence 
of approach across Member States. 

75 

 
 
 
 
 
 
3b.  Equivalent  third  countries:  Clarify  use  of  "equivalence"  of  third  country 

regimes 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0  

0 

0 

0 

2. Remove the concept of 
positive "equivalence". 
Non-equivalence to be used 
as a factor/example of  
geographical risk.. 

+ Allows use of a risk-
sensitive approach 

+ Recognises that some 
third countries do not 
meet high EU standards 

+ Consistent with risk-
based approach 

+ Some elements of risk 
assessment carried out 
across EU 

+ Consistency of treatment of 
third countries across the EU  

- Possibility that it will be 
used differently across the EU 

- Resources will be 
needed to update the list 
of equivalent countries 

+ Avoids concentrating 
on one risk factor (i.e.  
geography) 

3. No equivalence 
process. 

- Does not give any 
certainty as to how the 
EU views third countries 
with "equivalent" regimes 

- MS and some parts of 
the private sector report 
that equivalence process 
is useful 

- Lack of convergence 

The current  AML  Directive  recognises the concept of  third country  "equivalence", whereby 
obliged entities are able to apply less onerous measures (for example, in relation to customer 
due diligence) to financial institution clients from "equivalent" third countries.  This approach 
has  been  criticised  in  mutual  evaluation  reports  as  providing  an  automatic  exemption  from 
certain  requirements,  whilst  not  being  founded  on  the  basis  of  risk.  Three  options  are 
considered: 

1.  No change to the existing Directive: this option would leave the uncertainty of the 
current  provisions.    This  would  not  properly  address  the  deficiencies  found  in 
evaluation reports of Member States and would result in poor compliance ratings 
for MS going forward.   

2.  This  option  would  remove  the  concept  of  positive  "equivalence"  and  introduce  a 
concept  whereby      countries  that  are  deemed  to  have  AML  systems  that  are  not 
equivalent  to  those  in  the  EU  are  treated  as  a  factor  or  example  to  be  taken  into 
account  by  obliged  entities  when  they  are  considering  higher  geographical  risk 
alongside  other  risks,  such  as  customer  type  and  delivery  channel.    This  would 
highlight the risk of doing business with customers in countries which do not have 
"equivalent"  AML/CFT  regimes  to  the  EU,  and  would  also  make  "non-
equivalence" part of the overall risk package. 

3.  The  complete  removal  of  the  "equivalence"  process  would  leave  Member  States 
and obliged entities having to make their own decisions about risk.  Although this 
would  arguably  be  the  most  risk-sensitive  approach,  it  would  be  the  least 

76 

 
 
 
 
 
 
  
 
 
 
convergent  approach  and  would  not  recognise  an  exercise  which  some  Member 
States and obliged entities find useful.   

Stakeholders' views 

Mixed views were expressed by stakeholders as to the usefulness of the listing process and its 
relevance  in  light  of  the  revised  FATF  Recommendations’  focus  on  a  risk-based  approach.  
The majority supported the listing process as useful (especially for smaller firms), whereas a 
minority felt that the current regime was of little benefit.  Support for producing a binding list 
mainly came from the business sector while, according to several public authorities, such lists 
should rather be just one of a number of indicative factors of geographical risk.    

Conclusion 

Most stakeholders have expressed a desire to maintain an EU approach towards equivalence. 
However the current approach, which is based on Member State assessments which can result 
in  automatic  SDD  for  institutions  from  "equivalent"  third  countries,  is  not  sufficiently  risk-
based. By focusing on pre-existing assessments made at international level on non equivalent 
regimes, and by ensuring that obliged entities treat this as a risk factor alongside other risks, a 
consistent  approach  can  be  ensured  across  the  EU.  The  Commission  therefore  has  a  clear 
preference for option 2.  

77 

 
 
 
 
 
 
 
4.  Supervision: Introduce more explicit recognition of RBA to supervision 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Recognise that 
supervision can be risk-
sensitive, but leave the 
detail to be determined at 
sectoral level 

+ Meets Operational 
Objectives 1 and 2 

+ Can target specific risks 
in each sector 

3. Supervisors given the 
power and complete 
discretion on how to 
supervise all sectors 

+ Fully risk-sensitive  

+ Fully in line with 
Operational Objective 1 
(better fits to the FATF 
standards) 

- Not in line with 
Operational Objective 2 
(Lack of convergence) 

+ Flexible detailed 
requirements can be 
changed more easily than 
revising a Directive 

+ Can be informed by 
national and sectoral risk 
assessments 

- Some sectors do not have 
recognised colleges of 
supervisors (e.g. in the 
DNFBP sector) 

+ Allows greater degree of 
targeting, therefore 
improved efficiency 

+ Consistent with 
International Standards 

- May still be elements of 
divergence between 
sectors/MS. 

+ Consistent with 
International Standards 

- Different approach will 
create inconsistencies and 
increase costs across 
borders 

 - Impact on Internal Market 

The Third AML Directive requires obliged entities to be "effectively monitored".  The revised 
FATF standards give specific recognition that supervision of institutions and persons covered 
by the Recommendations can be carried out on a risk-sensitive basis.  This allows resources to 
be targeted at areas where risks are thought to be higher. 

Three options are considered: 

1.  No  change  to  the  existing  provision:  supervisors  would  be  able  to  continue  with 
existing approaches, although those that already use elements of risk-sensitivity would 
not necessarily be able to make use of the provisions in the revised FATF standards.  
Depending  on  the  Member  State's  interpretation  of  "effectively  monitor",  resources 
might not be used efficiently. 

2.  Limit the approach in the Directive to a specific recognition that supervision should be 
carried  out  on  a  risk-sensitive  basis,  with  a  link  made  to  national  and  sectoral  risk 
assessments  to  ensure  that  the  risks  are  adequately  captured,  and  give  a  role  to  the 
ESAs  to  develop  more  detailed  measures.      This  option  would  allow  supervisors  to 
adopt approaches which are more targeted towards risk. The concept would, however, 
be  more  appropriate  in  developed  sectors  (such  as  banking,  securities  and  insurance 
supervision), and less so in certain DNFBP sectors where a sectoral approach  at EU 
level might not be viable. 

78 

 
 
 
 
 
 
 
3.  Allow full discretion for supervisors to apply a risk-sensitive approach to supervision, 
without any additional measures at EU level as described under option 2.  This option 
would maximise flexibility for all supervisors, but would potentially lead to a lack of 
convergence  as  each  sector  in  each  Member  State  would  be  supervised  according  to 
different risks and principles.  

Stakeholders' views 

Among  the  few  respondents  who  expressed  a  clear  view  on  this  topic,  there  was  broad 
consensus  in  recognition  of  the  importance  of  risk-based  supervision.    With  respect  to 
supervision  of  cross-border  activities,  the  business  sector  was  concerned  that  the  minimum 
harmonisation  approach  should  avoid  that  scope  and  application  substantially  differ  across 
Member States, and strongly supported the provision of sectoral guidance.  Some stakeholders 
also suggested that  supervision  should focus  on less-developed sectors, rather than on high-
risk  entities  which,  very  often,  were  better  equipped  and  had  more  experience  in  facing  the 
specific ML/FT risks. 

Conclusion 

In  view  of  the  need  to  reflect  the  new  international  standards,  maintain  a  degree  of 
consistency  between  EU  supervisory  approaches  whilst  permitting  an  appropriate  level  of 
flexibility in implementation, the Commission has a clear preference for option 2. 

79 

 
 
 
 
 
 
 
5.  Politically  Exposed  Persons  (PEPs):  Broaden  existing  approach  to  treatment 
of  politically  exposed  persons  (PEPs)  to  cover  domestic  PEPs  and  PEPs 
working in international organisations on a risk-sensitive basis  

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Introduce requirements 
for domestic PEPs/PEPs 
in international 
organisations with risk-
sensitive elements 

+ Meets objective of 
widening scope 

+ Complies Operational 
Objective 1 

+ Addresses highest risk 
(foreign PEPs) and allow a 
graduated approach to other 
PEPs 

  + Consistent with 
international standards 

- Differential approach may 
lead to inconsistencies 

+Meets objective 

+ Clarity in requirement 

 + Requirement goes some 
way to Operational 
Objective 3. 

3. Extend provisions 
for international PEPs 
to domestic PEPs and 
PEPs in international 
organisations 

- Goes further than 
objective 

- Costly for industry, 
without corresponding 
benefit 

- Goes further than 
international standard 

The  existing  EU  standards  were  aimed  at  PEPs  residing  in  a  third  country,  and  require  a 
certain level of enhanced due diligence to be performed.  The revised FATF standards have 
expanded  the  definition  to  include  domestic  PEPs  and  PEPs  working  in  international 
organisations, with enhanced measures to be taken on a risk-sensitive basis. 

Three options are considered: 

1.  No  change:  although  this  option  would  mean  the  least  cost  to  industry,  it  would 
result  in  EU  legislation  being  below  the  international  standards,  and  Member 
States would risk poor compliance ratings in mutual evaluation reports. In addition 
it would not address an area of potential risk. 

in 

2.  Introducing  provisions  for  domestic  PEPs/PEPs  working 

international 
organisations, with risk-sensitive measures to be taken: this option is more in-line 
with  the  international  standards,  and  addresses  the  risks  posed  by  PEPs 
domestically  and  those  working  in  international  organisations,  who  might  have 
access to proceeds obtained corruptly.  However, as not all PEPs are automatically 
higher risk, a risk-sensitive element would be introduced to allow obliged entities 
to  assess  the  risks  that  they  pose  and  to  apply  appropriate  mitigating  measures, 
without interfering with the current need to apply higher requirements for foreign 
PEPs.  The differential approach might cause some confusion for obliged entities, 
who would need to apply different standards to different categories of PEP. 

3.  Extend the existing provisions (i.e. a requirement for EDD measures) to all types 
of  PEPs:  requiring  a  certain  level  of  enhanced  due  diligence  to  be  conducted  for 

80 

 
 
 
 
 
 
 
 
each  category  of  PEP  would  give  a  degree  of  consistency  to  the  provisions,  and 
would place the EU ahead of the international standard.  However, the cost of this 
requirement  to  industry  would  arguably  outweigh  the  potential  benefit,  with 
obliged entities being required to apply enhanced due diligence to all categories of 
PEP regardless of the risk.  This would involve a potential waste of resources. 

Stakeholders' views 

The  idea  of  extending  the  Directive  to  domestic  PEPs  and  PEPs  working  in  international 
organisations was fully supported by public authorities, representatives of liberal professions 
and civil society.  Support also came from the business sector (financial and non-financial), 
which however remained concerned about the significant difficulties faced when identifying 
PEPs.  These respondents therefore expressed a wish to see a clearer and narrower definition, 
a broader application of  the  RBA and the provision  of a centralised, up-to-date  and reliable 
PEPs lists. 

Conclusion 

In  view  of  the  heavy  cost  implications  that  the  approach  under  option  3  would  entail,  and 
given that the approach in option 2 would still be consistent with international standards by 
addressing  the  highest  risk  (foreign)  PEPs  while  allowing  a  graduated  approach  for  other 
types of PEPs, the Commission has a clear preference for option 2. 

81 

 
 
 
 
 
 
6.  Availability  of  beneficial  ownership 

information:  Enhance  the  public 
availability of information on the beneficial owner / enhance the transparency 
of legal persons and legal arrangements 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Requirement on 
companies to hold 
information on BO and to 
make this information 
available to competent 
authorities and obliged 
entities 

+ Enhanced transparency 

+ In line with Operational 
Objective 1 

+ Limited additional cost and 
easy to set up for companies,  

+ In line with Commission's 
EU Internal Security Strategy 

+ Relieves the current burden 
on obliged entities  

+ In line with international 
standards 

- Less public transparency 
than option 3 

- Cost on companies, 
especially for those with a 
complex structure 

3. Require public 
availability of information 
on shareholders, BO and 
nominees through a public 
register  

+ Enhanced transparency 

+ Meets demand for 
transparency from civil 
society and European 
Parliament 

+ Relieves the current burden 
on obliged entities  

+ In line with international 
standards 

- Challenge to maintain 
up-to-date information 

- Shifts burden (costs) onto 
Member States  

- may raise data protection 
concerns 

The new FATF standards require countries to ensure that there is a set of basic information on 
the  company    available  in  business  registries  and/or  held  by  the  company  itself  and  made 
available to competent authorities. Access by covered institutions to this information should 
be facilitated. Further transparency of nominee shares or directors is also required (disclosure 
of  identity  or  licensing).  Countries  can  choose  between  several  mechanisms.  For  legal 
arrangements, the standards recognise the role of the trustee as holder of the beneficial owner 
information and introduce a requirement for trustees to disclose their status when they engage 
with  reporting  parties.  The  current  Directive  does  not  provide  explicit  provisions.  Calls  for 
more  transparency  also  come  from  the  2010  Commission's  Internal  Security  Strategy110and 
the European Parliament111.  

Three options are considered:  

1.  No  change:  this  option  would  not  be  effective  as  it  would  not  allow  for  greater 
transparency on beneficial owner and legal persons and arrangements. It would not be 
in line with new FATF standards.  

110  

111  

Commission Communication: "The EU Internal Security Strategy in Action: Five steps towards a more secure Europe", COM 
(2010)673 final. 

European Parliament Resolution of 15 September 2011 on the EU's efforts to combat corruption. It  called for rules to “make the 
fight against anonymous shell companies in secrecy jurisdictions (…) a key element of the upcoming reform of the Anti-Money 
Laundering Directive 

82 

 
 
 
 
  
 
                                                            
2.  Require  Member  States  to  require  companies112  to  hold  and  up-date  information  on 
their beneficial owners and to make this information available to competent authorities 
and entities covered by the Directive. This option would allow greater transparency of 
information  on  the  ultimate  beneficial  owner  of  companies.  They  are  best  placed  to 
understand  their  own  beneficial  ownership,  and  making  the  information  available  to 
obliged  entities  would  be  a  useful  tool  in  the  CDD  process.  Some  cost  would  be 
involved in recording and maintaining this information, and making it available upon 
request.  Finally,  this  option  would  be  in  line  with  international  standards  and 
Commission's EU Internal security strategy.  

3.  Require  Member  States  to  set  up  public  registries  on  shareholders  as  well  as  on 
beneficial owners, in addition to the same information held by companies. This option 
would be the most effective as regards the level of transparency and would meet the 
demands from civil society and European Parliament to promote greater public access 
to beneficial ownership information. As with option 2, it would relieve the burden on 
obliged  entities  and  would  be  in  line  with  international  standards  and  the 
Commission's  strategy.  But  an  agreement  of  Member  States  could  be  difficult  to 
obtain given the new burdens it would place on them, and general availability of such 
information  may  raise  data  protection  concerns.  At  least  public  availability  of 
shareholder  information  should  be  provided,  which  is  already  a  reality  in  most 
Member States.  

Stakeholders' views 

There was strong support among stakeholders to include in the Directive measures to promote 
the transparency of legal ownership. Views differed, however, as to the means to achieve it. A 
majority of those who expressed an opinion stressed the need for an official, timely up-to-date 
and reliable source of information, possibly through national registries. Others suggested that 
a  centralised  database  should  be  created  at  EU  level  and  access  made  available  to  obliged 
entities. Some respondents argued that beneficial owners should be declared when registering 
a legal entity, and given advanced warning about the possible data protection implications.  

Conclusion 

In view of the fact that option 2 already goes beyond the international standards, it should be 
relatively straightforward to achieve, keep compliance costs for companies relatively low but 
at  the  same  time  represent  a  significant  benefit  for  obliged  entities,  the  Commission  has  a 
clear preference for option 2. 

112   

In the case of express trusts, in accordance with the international standards, there should be a requirement to identify the settlor, 
trustee, protector, the beneficiaries or class of beneficiaries and any other natural person exercising ultimate effective control 
over the trust, and to hold that information. 

83 

 
 
 
 
 
 
 
                                                            
7. Electronic fund transfers: Enhance  detection of misuse by terrorists and criminals of 
electronic fund transfers 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. Maintain current 
approach 

0 

0 

0 

0 

0 

0 

2. Make changes to the 
FTR to introduce  
requirement to include 
information on the 
beneficiary and limit 
exemptions from scope 

+ Improves detection by 
enhancing traceability of 
electronic fund transfers  

+ In line with Operational 
Objectives 1 and 2 

+ In line with EU Strategy on 
Terrorist Financing 

- Electronic fund transfers 
below €1,000 are not 
subject to identity 
verification 

- Limited additional costs 
for business due to 
adaptation of payment 
systems 

+ Improves detection by 
enhancing traceability of 
electronic fund transfers 

+ Exceeds international 
standards 

3. Require beneficiary and 
payer information to 
accompany the payment 
and require identity 
verification as of €0 

- May drive certain 
transactions to unregulated 
PSPs 

- Additional costs for non-
account based payment 
service providers 

- Not  in line with 
Operational Objective 2 
(flexibility) 

The new FATF standards seek to enhance the transparency and traceability of electronic fund 
transfers by requiring the inclusion of information about the beneficiary in wire transfers, as 
well  as  an  explicit  obligation  to  take  freezing  action  with  respect  to  UN  Resolutions  and  to 
prohibit  conducting  transactions  with  designated  persons  and  entities.  There  are  specific 
obligations on money or value transfer service providers (MVTS), in particular a requirement 
to  file  an  STR  in  any  country  affected  by  the  suspicious  wire  transfer,  and  make  relevant 
transaction information available to the Financial Intelligence Unit. 

Three options are considered:  

1.  No change: this option would not be effective as it would be inconsistent with the new 
FATF standards, and it would leave gaps with respect to traceability of electronic fund 
transfers. Since this is an area governed by an EU regulation, no facility to correct this 
deficiency  at  national  level  would  be  possible,  and  EU  Member  States'  legislation 
would  be  rated  non-compliant  with  the  international  standard,  with  corresponding 
reputational damage to the EU's financial system and its institutions.  

2.  Make changes to the Fund Transfers Regulation (FTR) to introduce a requirement to 
include  information  on  the  beneficiary  and  other  key  changes  resulting  from  the 
revised  international  standard:  this  option  would  not  entail  significant  adjustment 

84 

 
 
 
 
 
 
 
 
 
 
costs,  as  most  fund  transfers  already  contain  information  on  the  beneficiary  and  so 
would  not  be  affected.  Ensuring  that  beneficiary  information  is  included  in  all 
electronic  fund  transfers  would  provide  an  effective  tool  for  law  enforcement  and 
ensure full traceability of all transfers, although transfers below €1,000 do not require 
identity verification.  

3.  Require  beneficiary  and  payer  information  to  accompany  the  payment  and  require 
identity verification as of €0 as opposed to the existing th reshold of €1,000: this option 
would  be  the  most  effective  way  of  ensuring  full  traceability  of  electronic  fund 
transfers. However customer verification would entail significant additional costs for 
lower  value  transfers,  increasing  the  costs  for  the  end  users  and  potentially  driving 
parts  of  the  payments  business  to  more  risky  unregulated  payment  channels.  This 
option would exceed the international requirements. 

Stakeholders' views 

The  few  comments  received  on  this  topic  showed  a  divergence  of  views  according  to  the 
different  categories  of  respondents.    Whereas  some  public  authorities  considered  it 
appropriate to reduce the current thresholds in respect of electronic fund transfers (from the 
current € 1,000 threshold), business sector respo ndents (mainly financial services) considered 
the  current  amount  appropriate  and  argued  that  lowering  this  threshold  would  have  limited 
effects and disproportionate costs for the financial institutions.   

Conclusion 

In  view  of  the  fact  that  option  2  achieves  the  objectives  of  consistency  with  international 
standards without significant burdens for obliged entities, and that option 3 would introduce a 
substantial new compliance burden (albeit representing an enhancement to the possibility to 
trace transactions), the Commission has a clear preference for option 2.  

85 

 
 
 
 
 
 
 
II.  Policy  Options  relating  to  Operational  Objective  2  (Ensure  consistency  between 
national  rules  and  where  appropriate  flexibility 
implementation  by 
strengthening and clarifying current requirements).  

in  their 

7.  Improve comparability of statistical data  

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. Maintain current 
approach 

0 

0 

0 

0 

0 

0 

2. Provide further 
guidance on how reporting 
by MS should be carried 
out 

+ Might help improve the 
ability to measure  
effectiveness of the EU 
framework 

 + In line with Operational 
Objective 1 and 2 

- Comparability across MS 
will remain difficult 

- Limited additional costs 
for MS 

3. Reinforce the 
requirement under Art. 33 
of the 3AMLD with 
respect to statistical data  

+ Improves the ability to 
measure  effectiveness of 
the EU framework by 
imposing on MS more 
explicit requirements on 
comparability and sharing 
of information 

+ In line with Operational 
Objective 1 and 2 

- Comparability across MS 
will remain difficult unless 
underlying approaches (e.g. 
the notion of an STR) are 
also harmonised  

- Limited additional costs 
for MS 

+ Coherent with the Hague 
programme mandate 

Article  33  of  the  Third  AMLD  imposes  an  obligation  on  Member  States  to  maintain  and 
publish comprehensive statistics, so that they are in a position to review the effectiveness of 
their  AML/CFT  systems.  However  significant  definitional  and  systemic  differences  (e.g. 
different notions of what constitutes a "report", different processing of reports, and different 
approaches  towards  prosecution  of  cases)  considerably  undermine  comparability  across 
countries and complicate assessment of the extent to which AML/CFT systems are effective. 

Three options are considered: 

1.  No change: this option would entail no additional cost. However it would not achieve 
the  objective  of  comparability  across  the  EU  and  would  mean  that  an  overall 
assessment  of  the  EU  framework  would  remain  very  difficult.  Moreover,  given  that 
certain parts of the EU framework may be subject to supranational assessment by the 
FATF  in  the  future,  there  is  a  risk  that  the  EU  statistical  framework  to  measure 

86 

 
 
 
 
 
 
 
 
 
 
 
effectiveness  would  fall  short  of  the  international  standards.  The  current  degree  of 
flexibility that the AMLD allows has affected the comparability of statistical data, due 
to legal, operational and statistical reasons.  

2.  Provide  further  guidance  on  how  reporting  by  Member  States  should  be  carried  out 
with  a  view  to  achieving  more  coherence  between  data  sets.  This  option  would  not 
entail changes to the Directive, as Article 33 already contains minimum requirements 
on statistical reporting. Further Guidance issued by the Commission, building on the 
first  statistical  exercise  (see  "Money  Laundering  in  Europe”113)  could  serve  to 
improve  the  consistency  of  reporting  of  effectiveness  indicators  across  the  EU,  and 
facilitate  an  evaluation  of  the  effectiveness  of  the  EU  AML/CFT  framework  as  a 
whole. However the underlying differences with respect to AML approaches (e.g. the 
form of the reports differs significantly, the different definitions as to what constitutes 
a predicate offence, different procedures on handling information, etc.) would remain 
and  continue  to  complicate  cross-border  comparability.  However  as  the  existing 
minimum requirements (especially in Article 33.1) imposed on Member States are not 
sufficiently  detailed,  this  has  led  to  difficulties  to  obtain  comparable  data  across 
Member  States.  Such  problems  may  not  be addressed solely through the  issuance of 
additional guidance. 

3.  Reinforce the requirement under Article 33 with respect to statistical data in order to 
ensure more comprehensive and comparable statistics in compliance with the Action 
Plan  "Measuring  Crime  in  the  EU:  Statistics  Action  Plan  2011-  2015".  This  option 
would  consist  in  operationalizing  Article  33  (1),  by  notably  linking  it  with  the 
necessary national risk assessment. Article 33(2) could be amended in order to make 
more  explicit  the  data  requirements  .  Further  guidance  of  important  effectiveness 
indicators  across  the  EU  in  similar  ways to  those  described  under  option  2  could  be 
provided.  This  approach  might  enhance  comparability  of  important  effectiveness 
indicators across the EU in similar ways to those described under option 2. However, 
as  also  described  under  option  2,  comparability  across  Member  States  would  still 
remain impaired as a result of underlying differences with respect to AML approaches.  

Stakeholders' views 

Many  respondents  to  the  Commission's  consultation  supported  greater  harmonisation  of  the 
reporting regime across the EU, in order to improve effectiveness. 

Conclusion 

In view of the fact that Member States have inconsistently implemented the requirements in 
Article  33,  further  clarification  of  the  requirements  appears  necessary  in  the  Directive.  For 
this reason, the Commission has a clear preference for option 3. 

113  

 ISSN 1977-0375, Eurostat Methodologies and Working Papers, Cynthia Tavares, Geoffrey Thomas and Mickaël Roudaut, 2010 
edition. 

87 

 
 
 
 
 
 
                                                            
8.  Identification  of  the  "beneficial  owner",  including  clarification  of  25% 

ownership threshold 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

+ Coherent with Internal 
Market 

2. Retain 25% threshold 
but clarify requirements 
for holding companies. 
Leave open for guidance 
by ESAs. 

+ Meets objective of 
clarification 

+ ESAs best placed to 
provide further 
clarification 

+ Threshold gives a 
framework for obliged 
entities 

+ In line with company law 
concept of ownership 

+ Flexibility for guidance by 
ESAs 

 - Converged national 
approaches in line with 
Operational Objective 2 

- Concentration on threshold 
may not always find the 
ultimate beneficial owner. 

+ More focussed towards the 
actual risk 

3. Remove threshold 
and replace with 
requirement to always 
find natural person 
who owns/controls 
company 

+ Targets the potential 
risk (i.e. person who 
controls company) 

+ Exceeds Operational 
Objective 1  

+ Requirement goes some 
way to meeting 
Operational Objective 3. 

- Could lack clarity unless 
detailed guidance is 
prepared 

- possible conflict with 
Operational Objective 2. 

- Costly for industry 

- Greater risk of diverging 
implementation across MS  

Existing  EU  legislation  defines  beneficial  owner  as  "the  natural  person(s)  who  ultimately 
owns  or  controls  the  customer  and/or  the  natural  person  on  whose  behalf  a  transaction  or 
activity  is  being  conducted".    When  beneficial  ownership  can  be  ascertained  through  share 
ownership, a 25% plus 1 share threshold is given as evidence of direct or indirect ownership.  
However, a report by the AMLC has identified issues in relation to how the 25% threshold is 
interpreted in Member States. 

Three options are considered: 

1.  No  change  would  mean  that  obliged  entities  would  not  need  to  adjust  their  systems.  
However, the inconsistency of interpretation across Member States has already led to a 
lack of convergence, and thus this is not the preferred option. 

2.  Maintain the approach which requires identification of the BO as of a 25% ownership 
threshold,  but  clarify  what  the  "25%  threshold"  refers  to,  particularly  in  relation  to 

88 

 
 
 
 
  
 
 
 
 
holding  companies  and  foundations.  This  option  would  address  the  issue  of 
inconsistency and lead to greater convergence.  The precise nature of the requirement 
could be left for clarification in guidance by the ESAs where related issues such as the 
clarification  of  the  relationship  between  "ownership"  and  "control",  "multi-layer 
corporate  vehicle  structures",  and  "close  associate"  could  also  be  tackled.    There 
should,  however,  be  a  clear  understanding  that  the  25%  threshold  is  a  minimum 
standard,  and  not  a  replacement  for  the  requirement  to  find  the  ultimate  beneficial 
owner where doubts exist that shareholding alone is sufficient. For example, reporting 
entities  could  be  required,  when  confronted  with  suspicious  circumstances,  to 
undertake  further  inquiry  to  identify  and  record  information  on  other  parties  who 
appear  relevant  (the  "close  associate"  i.e.  the  typical  frontman)  to  find  out  whether 
other natural persons beyond the formal legally declared owners really are in control. 

3.  Remove the existing 25% threshold and replace it with a stricter requirement to always 
find  the  natural  person  who  owns/controls  the  company.  This  option  would  require 
obliged  entities  to  focus  more  on  the  actual  risk  posed  by  persons  who  control 
companies.  However, it would lead to greater expense for obliged entities and a lack 
of  guidance  as  to  what  was  expected  could  lead  to  a  lack  of  convergence  across 
Member States, who might interpret the person who "controls" a company differently.  

Stakeholders' views 

A substantial majority of stakeholders commenting on this issue shared the view that the 25% 
threshold  appears  appropriate  and  should  be  maintained.    The  support  was  even  stronger  as 
regards  the  usefulness  of  improving  legal  certainty  across  the  EU  about  who  the  beneficial 
owner is, while maintaining a risk-based approach to identifying, and verifying the identity of 
beneficial owners. 

Conclusion 

In view of the fact that option 2 would be the best way to ensure greater convergence between 
Member State approaches, and given that the ESAs are best placed to carry forward work in 
this area, the Commission has a clear preference for option 2. 

89 

 
 
 
 
 
 
 
9.  Clarify  responsibilities  for  AML  supervision  between  the  home  and  host 

supervisors 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

+ Establishes a clear legal 
footing for supervisors 

+ Increased clarity for 
business 

+ More efficient detection of 
ML/TF by FIUs 

+ Fulfils Operational 
Objectives 2 and 3  

- Reduced flexibility for MS 

2. Clarify in the Directive 

+ Clarity and coherence 
across Member States 
facilitates the business 
environment 

+ Coherent with 
International Standards 

- Introducing a 
requirement to report 
suspicions where they 
arise risks adding burdens 
for cross-border market 
operators 

- Potential Conflicts with 
Internal Market would need 
to be addressed 

Article  37  of  the  Third  AMLD  obliges  Member  States  to  require  competent  authorities  to 
monitor  and  take  measures  to  ensure  compliance  with  the  requirements  of  the  Directive  by 
obliged persons and institutions. 

Public  stakeholders,  especially  supervisory  authorities,  have  expressed  concerns  about  the 
lack  of  legal  certainty  in  the  current  legislative  texts  about  their  ability  to  ensure  correct 
compliance  with  host  state  AML/CFT  obligations  in  the  case  of  payment  service  and  E-
Money  providers,  operating  on  the  basis  of  a  single  EU  passport  via  branches  or  agencies. 
Such uncertainties have the potential to create gaps in compliance and might undermine the 
effectiveness of the framework. 

Two options are considered: 

1.  No change:  the Commission has already published a staff working document which 
clarifies  the  articulation  between  the  Payment  Services  Directive  and  the  Third 
AMLD. However stakeholders – especially public authorities – have complained that 
the  staff  working  document  does  not  provide  sufficient  legal  certainty,  as  it  is  not 
legally binding. It would therefore fall short of providing both supervisors and obliged 
entities  with  legal  certainty,  and  may  not  resolve  persisting  uncertainties  which 
complicate cross-border business on the basis of a single passport 

2.  Clarify  in  the  Directive:  this  option  would  build  on  the  existing  clarifications 
contained in the Commission's staff working document, and establish rules on a firm 
legal footing, thus providing certainty for supervisors and obliged entities about how 
AML  compliance  may  be  achieved  so  that  host  state  rules  are  respected,  while 

90 

 
 
 
 
 
ensuring  no  undue  hindrance  to  the  cross  border  provision  of  services  by  licenced 
entities. The introduction of a requirement to file STRs to the FIU in whose territory 
the institution or person forwarding the information is situated will lead to improved 
detectability of ML/TF by FIUs, and should not impose additional burdens for cross-
border businesses. 

Stakeholders' views 

All stakeholders responding on this issue were in favour of clarifying the regulatory powers 
which  home  and  host  AML/CFT  supervisors  have  in  cross-border  situations.    In  particular, 
many respondents highlighted the need to consider such powers with regard to payment and 
e-money  institutions,  their  agents  and,  where  applicable,  their  distributors.    Support  for 
recognising  the  host  country's  power  to  directly  supervise  and,  where  need  be,  prosecute 
breaches  of  AML/CFT  provisions  occurring  on  its  territory  (including  cases  of  non-
compliance with CDD procedures and insufficient ST/SA reporting) came from several public 
authorities.    The  business  segment,  although  in  favour  of  clarifying  supervisor  authorities' 
powers in cross-border situations, was of the view that duplicating regulatory obligations by 
requiring  compliance  to  local  AML  provisions  creates  additional  costs.    These  respondents 
therefore  envisaged  greater  co-operation,  information  sharing  and  possible  delegation  of 
powers between home and host AML/CFT supervisors.  

Conclusion 

In view of the fact that there is a need to respond to stakeholders' concerns for greater legal 
certainty in ways which would both clarify responsibilities of AML supervisors as well as the 
requirements on cross-border businesses, the Commission has a clear preference for option 2.  

91 

 
 
 
 
 
 
10. Strengthen  and  converge  administrative  measures  and  sanctions  for  obliged 

entities not complying with the requirements of the Directive  

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Introduce a set of 
common principles-based 
rules to strengthen 
administrative sanctions 

+ Improved compliance by 
obliged entities 

+ Enhanced comparability 
between MS  

+ In line with the General 
Objectives 

+ A more level playing field 

+ Coherence across Member 
States facilitates the business 
environment  

+ In line with 
Commission's policy on 
strengthened financial 
services sanctions   

- Less flexibility for MS  

- Adjustment costs 

3. Introduce common 
rules on sanctions, 
setting the minimum 
level of sanction 
according to different 
offences and for each 
category of 
administrative fine. 

+ A  fully level playing field 

+ Coherence across Member 
States facilitates the business 
environment 

+ In line with 
Commission's policy on 
strengthened financial 
services sanctions   

- No flexibility for MS 

- Not fully in line with 
Operational Objective 2 

- Challenging to agree as 
legal systems and traditions 
vary considerably 

The Commission's Communication "Reinforcing sanctioning regimes in the financial sector" 
of  8  December  2010  sets  out  core  principles  that  should  apply  to  sanctions  on  financial 
institutions.  The  objective  is  to  reinforce  the  efficiency  and  convergence  of  the  sanctioning 
regimes, in order to strengthen the Single Market. Strengthening sanctioning regimes was also 
one  of  the  elements  of  the  financial  sector  reform  at  international  level.  According  to  the 
Commission's policy, standard provisions are to be incorporated into all Directives related to 
Financial  Services.  Elements  include:  the  requirement  to  have  a  set  of  core  administrative 
sanctions for key infringements; publication of sanctions as a rule; a sufficiently high level of 
administrative  fines  (not  less  than  obtained  benefits);  harmonisation  of  criteria  to  determine 
the  sanction;  ensuring  that  authorities  have  the  necessary  powers  when  dealing  with  cross- 
border cases. Certain of these standard clauses might not be adequate for AML/CFT purposes, 
and the policy will need to be tailored to the specific needs of the sector.  

Three options on how to strengthen and converge national rules are considered:  

1.  No  change:  this  option  would  entail  no  additional  cost.  However  it  would  not 
contribute to a reinforcing of AML/CFT compliance by obliged entities and would not 
be in line with the Commission's Communication "Reinforcing sanctioning regimes in 
the financial services sector". The playing field among obliged entities from different 
Member States would remain unlevel.  

92 

 
 
 
 
 
 
 
 
 
 
2.  Introduce  a  set  of  common  principles-based  rules  to  strengthen  administrative 
sanctions, along the lines of the Commission's policy as outlined in its Communication 
'Reinforcing  sanctioning  regimes  in  the  financial  services  sector:  this  option  would 
enhance effectiveness of the AML/CFT regime by improving compliance by obliged 
entities and allowing for a more consistent approach across Member thereby ensuring 
a  greater  level  playing  field  for  EU  companies  and  facilitating  the  business 
environment. Some adjustment costs would be incurred, and a degree of flexibility for 
Member States would be curtailed. 

3.  Introduce  a  detailed  set  of  prescriptive  rules,  (e.g.  setting  the  minimum  level  of 
sanctions according to different offences and for each category of administrative fine): 
this  option  would  fulfil  the  same  objectives  as  option  2.  However,  it  would  reduce 
flexibility for Member States (not fully in line with Operational Objective 2). As legal 
systems and traditions vary considerably within the EU, it could be prove difficult in 
practice to agree on a fully harmonized sanctioning regime.  

Stakeholders' views 

Around one quarter of respondents expressed a view on this issue.  A majority were in favour 
of greater harmonisation of the sanctioning regime across Member States.  Support came in 
particular  from  the  business  sector,  on  the  grounds  that  there  was  a  need  to  ensure  a 
common/uniform application of the administrative sanctions regime, in order to avoid that one 
national  system  might  be  more  favourable  than  another.    It  was  also  argued  that  providing 
more  powers  and  sanctions  for  AML/CFT  purposes  would  send  the  right  message  that  was 
currently lacking.  Public authorities were also supportive, stressing that harmonisation would 
be an efficient tool for the prevention of regulatory arbitrage.  However, it was also argued 
that  while  it  would  be  useful  for  all  Member  States  to  have  a  legal  basis  to  apply 
countermeasures  when  they  considered  it  appropriate  to  do  so,  rigid  prescription  of  such 
countermeasures at EU level would greatly undermine the risk-based approach and would be 
against the principle of subsidiarity. 

Conclusion 

In view of the need to strengthen sanctions with a view to more effective enforcement of the 
rules,  but  given  that  systems  in  place  in  the  Member  States  function  very  differently,  a 
flexible not overly-prescriptive approach appears the most appropriate. For these reasons the 
Commission has a clear preference for option 2.  

93 

 
 
 
 
 
 
III. Policy Options relating to Operational Objective 3 (Ensure that the rules are risk-
focussed and adjusted to address new emerging threats, by strengthening and clarifying 
current requirements).  

11. Broaden the scope to cover the gambling sector and address new threats 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. Maintain current 
approach 

0 

0 

0 

0 

0 

0 

+ Enhances effectiveness 
of the fight against 
ML/TF 

+ Levels the playing field 
with non-obliged 
gambling sector 

+ Exceeds Operational 
Objective 1 

+ In line with Operational 
Objectives 2 and 3 

2. Change scope to cover 
the gambling sector based 
on a broad definition – 
exemptions only if there is 
a very low risk of ML/TF 

+ Simpler to apply 

+ Risk based approach allows 
exemptions in cases of very 
low ML/TF risks 

+ Consistent with the Internal 
Market 

- Additional costs to sectors 
not currently covered by the 
framework 

-Additional costs to supervise 

+ Enhances effectiveness 
of the fight against 
ML/TF 

+ No costs for gambling 
activities which are not 
identified as higher risk 

3. Change the scope to 
cover gambling activities 
where there is a proven 
higher risk 

+ Levels the playing field 
with non-obliged 
gambling sector 

+ Exceeds Operational 
Objective 1 

- Less flexible to 
emergence of new risks 

-  Not fully in line with 
Operational Objectives 2 
and 3 

- Requires a supranational 
assessment of risk 

- More complex to apply due 
to need for identification of 
higher risk activities 

- Additional costs to sectors 
not currently covered by the 
framework 

- Additional costs to supervise 

The  Third  AMLD  includes  "casinos"  within  its  scope  but  without  providing  any  definition. 
Activities  "performed"  on  the  Internet  (recital  14)  are  also  covered.  There  are  concerns  that 
the  absence  of  a  clear  definition  leads  to  different  approaches  at  national  level,  and  leaves 
important areas of the gambling business which may be particularly vulnerable to AML/CFT 
outside the scope of the preventative framework.  

94 

 
 
 
 
 
 
 
 
Three options are considered: 

1.  No  change:  this  option  would  entail  no  additional  costs  for  the  as  yet  uncovered 
gambling sector, however the ML/TF vulnerabilities would remain, as would the costs 
of  cross-border  compliance  resulting  from  different  national  regulatory  approaches. 
The  playing  field  for  AML  regulated  vs.  non  AML  regulated  gambling  activities 
would remain unlevel. 

2.  Broaden  the  scope  of  the  Directive  beyond  "casinos"  to  cover  the  gambling  sector, 
based  on  a  broad  definition  of  gambling.  The  scope  for  exemptions  from  coverage 
would be limited only to circumstances where there is a very low risk of ML/TF: this 
option  would  entail  costs  for  those  higher  risk  gambling  businesses  not  currently 
caught  by  the  existing  AML/CFT  framework  (e.g.  sports  betting,  betting  shops, 
lotteries,  etc.).  Introducing  AML/CFT  systems  entails  high  compliance  costs  – 
especially  in  terms  of  the  initial  investment  needed.  It  is  much  harder,  on  the  other 
hand, to estimate the potential benefits of closing down an important avenue of money 
laundering to organised crime.  

3.  Broaden the scope of the Directive beyond "casinos", but include only those gambling 
activities where there is a proven higher risk: this option would be impose no costs on 
certain  gambling  businesses  which  remained  outside  the  scope  of  the  Directive. 
However  identifying  which  types  of  activity  are  not  higher  risk  may  in  practice  be 
difficult, and the approach may not be flexible enough to respond to market changes 
which result in the emergence of new, unforeseen risks.  

Stakeholders' views 

Almost one third of respondents expressed views on this topic.  There was strong support to 
include  gambling,  and  to  ensure  that  it  covered  both  land-based  and  on-line  gambling 
activities  (including  e.g.  sports  betting,  horse  racing  and  lottery  games).    Most  of  those 
respondents stressed the need for a risk-based approach (which in their view would therefore 
exclude  e.g.  arcades,  kiosks  and  gas  stations  from  the  scope  of  the  Directive).  Most 
respondents  from  the  gambling  sector  also  pointed  that  such  an  extension  would  imply 
provisions on CDD and supervision would need to be adapted in light of the specificities of 
on-line and land-based gaming activities other than traditional casinos. 

Conclusion 

In  view  of  the  need  to  address  threats  of  money  laundering  in  the  gambling  sector  more 
broadly  than  the  current  limitation to  casinos,  and  in  view  of  the  fact  that  applying  a  broad 
definition  of  the  scope  of  gambling  would  be  more  straightforward  than  attempting  to 
determine at EU level which specific areas of gambling might be considered higher risk (such 
an  assessment  might  vary  across  jurisdictions)  the  Commission  has  a  clear  preference  for 
option 2.  

95 

 
 
 
 
 
 
12. Clarify application of data protection rules in the context of AML/CFT  

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Require MS to clarify 
interaction between 
AML/CFT and DP rules at 
national level 

3. Introduce new rules in the 
AML Directive to clarify 
interaction, in particular as 
regards data retention and 
data sharing within the groups 

+ Reduced uncertainties 
for entities; better 
compliance with AML 
and data protection 
requirements  

+ Enhanced level of 
respect of data protection 
rules 

+ In line with Operational 
Objectives 1 and 3 

- Incoherence across 
Member States 

+ Enhanced coherence 
across Member States;  

+ Reduced uncertainties 
for entities;  better 
compliance with AML 
and data protection 
requirements  

+ AML group-wide 
compliance facilitated 

+ In line with all  
Operational Objectives 

+ Member State 
authorities would retain 
flexibility 

- Not in line with Internal 
Market  

+ Cost savings  for groups  + In line with Internal Market 

+ In line with International 
Standards 

+ In line with Commission's 
Data protection proposals 

- Data sharing with third 
countries whose DP 
regimes have not been 
recognised likely to 
remain problematic  

- Possibly difficult to 
agree on a wording which 
reflects an appropriate 
balance between AML 
and DP objectives 

Private  stakeholders  point  to  a  number  of  practical  difficulties  as  regards  their  ability  to 
comply with AML requirements while at the same time adhering to rules aimed at ensuring a 
high  level  of  protection  of  personal  data.  These  difficulties  include  sharing  of  information 
within the group or between FIUs, screening on the basis of non-EU sanctions lists, consent of 
the  data  subject,  record  keeping,  and  legal  uncertainties  with  regard  to  processing  of 
AML/CFT related data within entities. The recently proposed EU Regulation and Directive on 
data  protection114  are  aimed  at  strengthening  and  clarifying  data  protection  rules  and  might 
need to be clarified in the revised AML/CFT legal framework. In its Opinion 14/2011115, the 

114  

115  

Commission's data protection proposals (COM(2012) 11 final) and (COM(2012) 10 final). 
http://ec.europa.eu/justice/newsroom/data-protection/news/120125_en.htm 

Opinion 14/2011on data protection issues related to the prevention of money laundering and terrorist financing, 
01008/2011/EN, WP 186, 13 June 2011, http://ec.europa.eu/justice/policies/privacy/docs/wpdocs/2011/wp186_en.pdf 

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
Article  29  data  protection  working  party  called  for  more  detailed  consideration  of  data 
protection  issues  in  the  AML  legislation,  in  particular  as  regards  retention  of  personal  data.  
One particular issue is the requirement, reinforced by the new FATF standard, to implement 
at  a  group  level  AML/CFT  programmes,  including  policies  and  procedures  for  sharing 
information  within  the  group.  Within  the  EU,  institutions  experience  in  practice  some 
restrictions  from  local  data  protection  authorities  to  the  sharing  of  data  (e.g.  restrictions  to 
information sharing on STRs, to information flows to the auditors of the Head Office). Data 
sharing with third countries whose data protection regimes are not considered adequate may 
raise other difficulties.  

1.  No  change:  this  option  would  entail  no  additional  costs.  However  obliged  entities 
would continue to experience difficulties in their AML compliance all the more so as 
reinforced  rights  stemming  from  the  new  EU  data  protection  proposals  (e.g.  a 
reinforced right to be forgotten, information about data security breaches) could lead 
to  new  legal  uncertainties.  Inconsistency  across  Member  States  would  continue  to 
exist, leading to uneven level playing field. As regards data sharing within the groups, 
institutions will continue to experience legal uncertainties and practical difficulties.  

2.  Require Member States to clarify interaction between AML/CFT and data protection 
rules  at  national  level  (e.g.  by  issuing  guidance,  setting  up  a  dialogue  between  data 
protection and AML/CFT authorities, or introducing specific rules into national AML 
laws):    this  option  would  help  reduce  legal  uncertainties  to  which  businesses  are 
confronted in their day-to-day operations and therefore enhance their compliance with 
AML  rules  while  at  the  same  time  ensuring  compliance  with  a  high  level  of  data 
protection. However, incoherence across Member States would continue to exist as a 
result of differing national interpretations, implying costs for cross-border businesses 
and complications for groups operating cross-border group compliance of AML/CFT 
programmes.  As  regards  the  particular  issue  of  data  sharing  within  the  group,  this 
option would not bring a satisfactory solution. Indeed, if clarification is offered only at 
national level, entities of the groups established in different Member States might still 
not  be  able  to  share  data  due  to  inconsistencies  in  national  legislations/practices  of 
national data protection authorities. 

3.  Introduce  new  rules  in  the  AML  Directive  to  clarify  the  interaction  between 
AML/CFT and data protection rules: this option would help reduce legal uncertainties 
to which businesses are confronted in their day-to-day operations and notably facilitate 
cross-border  group  compliance  of  AML/CFT  programmes,  which  would  be  in  line 
with the new international standards. New provisions might clarify how long data can 
be held by obliged entities, the circumstances under which data can be transferred to 
third  countries,  and  ensure  that  data  collected  for  AML/CFT  purposes  cannot  be 
processed for commercial purposes.  

Stakeholders' views 

Many  stakeholders  complained  that  national  data  protection  rules  impacted  effective  intra-
group  transfer  of  information  –  this  was  one  of  the  most  important  factors  generating 

97 

 
 
 
 
 
                                                                                                                                                                                          
 
administrative  burdens  and  reducing  the  effectiveness  of  AML  procedures.    The  business 
sector also warned about three further issues:  

•  under  the  current  data  protection  regime,  there  are  serious  restrictions  on  disclosure 

and transfer of personal data to third country public authorities; 

• 

there are difficulties with respect to data retention periods; 

•  under  the  proposal  for  a  data  protection  Regulation,  it  is  not  clear  how  the 
empowerment to introduce restrictions of data protection principles will be interpreted.   

There  was  unanimous  recognition  of  the  need  to  address  these  issues  by  ensuring 
effectiveness  in  monitoring  and  reporting  in  ways  which  would  not  breach  data  protection 
principles.  Diverging opinions were however expressed on the right way forward.  Support 
for the idea of introducing more detailed data protection provisions for AML/CFT purposes 
was particularly strong from business. 

Conclusion 

In view of the need to ensure a high level of data protection whilst at the same time ensuring 
proper compliance with AML rules, it appears appropriate to ensure an adequate legal basis 
for  data  processing  in  specific  AML  legislation.  This  would  be  best  achieved  within  an  EU 
Directive,  as  opposed  to  in  national  legislation,  as  this  would  be  the  best  way  of  ensuring 
coherence  across  Member  States  and  facilitating  personal  data  sharing  for  AML  purposes 
across  groups  (particularly  across  borders).  For  these  reasons,  the  Commission  has  a  clear 
preference for option 3.  

98 

 
 
 
 
 
13.  Threshold for traders in high value goods: Strengthen the preventive measures 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

1. No change 

0 

0 

0 

0 

0 

0 

2. Reduce the threshold 
(scope and requirement to 
conduct CDD to €7,500) 

+ Addresses risk of use of 
cash 

+ Exceeds Operational 
Objective 1 

+ In line with Operational 
Objectives 2 and 3 

+ Targets the black 
economy 

+ Brings threshold more in 
line with common practice in 
MS  

+ Compliments policies 
aimed at the free movement 
of persons  

+ Shows EU response to 
address actual ML concerns 

3. Reduce the threshold 
(scope and requirement 
to conduct CDD) to zero 

- May bring more obliged 
entities into scope, or 
push them towards 
accepting other payment 
means, with potential cost 
implications 

+ Firm controls on the use 
of cash  

+ Targets the black 
economy 

+ Single threshold would 
promote certainty 

+ Exceeds Operational 
Objective 1 

+ In line with Operational 
Objectives 2 and 3 

- Risks driving the use of 
cash underground 

- Financial inclusion 
impacts 

- May bring more obliged 
entities into scope, or 
push them to accepting 
other payment means, 
with potential cost  
implications  

- Challenging to monitor 
compliance 

+ Compliments policies 
aimed at the free movement 
of persons 

- Singles out this sector for 
more stringent rules 

The existing Directive covers natural or legal persons trading in goods but only if they accept 
cash payments of €15,000 or more.  CDD is requi red for occasional transactions above this 
amount.    Evidence  suggests  that  some  Member  States  are  applying  lower  thresholds,  which 
has  resulted  in  driving  the  use  of  traders  for  the  purposes  of  laundering  the  proceeds  of 
robberies to other Member States. 

Three options are considered: 

1.  No change: this option would mean no change in the numbers of traders brought into 
scope  and  no  change  to  the  threshold  for  CDD.    Although  this  would  be  the  least 
costly option, it would fail to address risks identified by a Member State. 

99 

 
 
 
 
 
 
 
 
 
 
 
2.  Reducing  the  scope  and  CDD  thresholds  to  €7,500 116:  this  option  would  bring  more 
traders into the scope of the Directive, and mean that they would need to apply CDD 
measures  for  cash  transactions  of  €7,500  and  above.    This  lower  threshold  would 
potentially bring a larger number of traders into the scope of the Directive, and may 
mean  that  CDD  would  be  carried  out  for  more  transactions,  or  alternatively  that  the 
number  of  cash  transactions  actually  executed  above  €7,500  would  be  considerably 
reduced  as  traders  insisted  on  other  means  of  payment.    This  option  would  address 
concerns  about  the  use  of  cash  in  the  black  economy  as  well  as  that  the  higher 
threshold has resulted in the proceeds of robberies from one Member State (which has 
lowered the threshold) being laundered in other Member States with higher thresholds.  
This would reduce the attractiveness of using the sector in the EU to launder criminal 
proceeds. 

3.  Reducing  the  scope  and  CDD  thresholds  to  zero  for  specified  obliged  entities  (e.g. 
dealers in precious metals and stones, second hand car dealers, auction houses): while 
it would be effective in limiting the use of cash, the inconvenience and potential costs 
may be disproportionate as compared with the perceived benefit.  Effectively requiring 
AML  controls  for  all  transactions  (especially  CDD)  could  drive  the  use  of  cash  into 
the  unregulated  sector  and  could  have  impacts  on  financial  inclusion.  It  would  also 
prove  challenging  and  resource  intensive  for  competent  authorities  to  ensure 
compliance. 

Stakeholders' views 

The  opinions  expressed  on  this  issue  diverged  according  to  the  different  categories  of 
respondents.    Whereas  several  public  authorities  considered  it  appropriate  to  reduce  the 
current thresholds in respect of occasional transactions (suggestion was made, for example, to 
substitute  the  current  €  15,000  th reshold  to  a  minimum  €  1.000  th reshold,  or  even  to  a  €  1 
threshold in case of payment in cash, or via a prepaid card), the majority of respondents from 
the  business  segment  (mainly  financial  services),  although  generally  in  favour  of  ensuring 
greater  harmonisation  across  the  MS,  did  not  see  a  real  need  for  lowering  this  amount  and 
warned  about  the  cost  implications.    Respondents  belonging  to  certain  professions 
(accountants,  lawyers)  also  stressed  the  importance  of  clarifying  the  scope  of  the  provision, 
and particularly the meaning of 'several operations which appear to be linked'.   

Conclusion 

There is a need to address vulnerabilities caused by different national approaches to ensuring 
that  traders  in  high  value  goods  apply  CDD  in  appropriate  circumstances.  Reducing  the 
threshold to conduct CDD to zero for certain specified traders may result in disproportionate 

116  

The choice of a €7,500 threshold is explained by simply halving the existing threshold. 9 Member States currently apply 
thresholds below the existing €15,000 stipulated in the Directive, of which 4 Member States apply thresholds below €7,500. The 
expected impact on traders of a reduction of the threshold would not to increase costs, but rather to substantially reduce the 
number of transactions taking place using cash - to the advantage of other payment means (which may carry some additional 
costs – e.g. fees related to a credit card transaction). The impacts associated with the application of different thresholds (e.g. 
€10,000, €5,000) have (in the absence of available data) not been assessed, however it is reasonable to assume that they would 
not reveal significant differences with respect to the likely costs incurred by traders. There would however be different impacts 
on the number of cash payments, according to the chosen threshold. 

100 

 
 
 
 
 
 
                                                            
costs.  For  that  reason,  the  Commission  has  a  preference  for  option  2,  which  is  more 
proportionate to the Operational Objectives and would reduce the attractiveness of using the 
high  value  goods  sector  to  launder  the  proceeds  of  robberies,  while  bringing  greater 
convergence of approaches across Member States.   

101 

 
 
 
 
14. Strengthen the capacity of FIUs to cooperate across borders 

Policy options 

Comparison criteria 

Effectiveness 

Efficiency 

Coherence 

Maintain current approach 

0 

0 

0 

0 

0 

0 

+ Enhanced effectiveness 
of the fight against 
ML/TF 

+ in line with Operational 
Objectives 1 and 2 

+ in line with Specific 
Objective 2 

Strengthen FIU powers and 
cooperation by introducing 
new provisions in the 
Directive 

+ Enhanced legal clarity  

+ Complements the EU's 
Internal Security Strategy 

- Some difficulties to 
exchange information may 
remain 

+ Enhanced effectiveness 
of the fight against 
ML/TF 

+ potential advantages in 
terms of economies of scale 
and efficiencies 

+ Complements the EU's 
Internal Security Strategy  

Establish a single European 
FIU 

+ in line with Operational 
Objectives 

- Requires substantial 
modifications to Member 
States' laws permitting 
cross-border cooperation 
and information sharing 

- Potential additional costs 
at EU level 

- Risk to delay agreement 
on the full package due to 
Member State concerns 
about sovereignty 

Article 38 of the Third AMLD establishes a role for the Commission to facilitate coordination 
between FIUs, but does not otherwise deal with FIU cooperation.  

The current framework for FIU Cooperation is based around a Council Decision dating back 
to 2000. However FIUs have complained that the current arrangements contain a number of 
shortcomings: cooperation on terrorist financing is not foreseen in the Decision and the recent 
past international events have brought to light difficulties for FIUs to cooperate on the basis of 
lists  of  designated  persons,  or  to  take  action  before  an  STR  has  been  filed.  Member  States 
have  different  interpretations  about  the  legal  basis  granted  by  the  Decision  to  undertake 
specific types of cooperation, such as the automatic exchange of information when links are 
found  with  another  Member  State.  Some  of  the  problems  in  exchanging  information  stem 
from the different powers that FIUs have at national level, including the possibility to access 
information, and this has consequences for the effectiveness of cooperation.  

Three options to strengthen cooperation are considered: 

1.  No  change:  this  option  would  entail  no  additional  costs.  However  deficiencies  in 
cross-border cooperation would remain, and may constitute a factor of vulnerability in 
the AML/CFT framework.  

102 

 
 
 
 
 
 
2.  Strengthen  FIU  powers  and  cooperation  by  introducing  new  provisions  in  the 
Directive:  the  FIU  Platform  has  submitted  a  set  of  proposals  aimed  at  enhancing 
cooperation,  including  providing  an  explicit  legal  basis  for  the  matching  of 
anonymous data between the EU FIUs or clarifying data protection rules to explicitly 
allowing  certain  types  of  information  exchange:  this  option  would  not  be  especially 
costly  to  implement,  and  would  serve  to  remedy  the  most  significant  problems 
encountered by FIUs. However it would be unlikely to overcome all the cooperation 
issues faced by FIUs. 

3.  Establish  a  single  European  FIU  to  receive  and  analyse  and  disseminate  to  the 
competent authorities disclosures of information from obliged entities operating within 
the EU: this option would require additional funds to be made available at EU level, 
and  may  raise  concerns  among  Member  States  about  sovereignty,  and  require  quite 
far-reaching  changes  to  Member  States'  rules  and  existing  arrangements.  However  it 
would  be  more  suited  to  an  integrated  EU  financial  market,  and  would  also  be 
arguably  the  most  efficient  and  effective  way  to  combat  money  laundering  and 
terrorist  financing  across  the  EU,  by  allowing  a  more  complete  overview  of  the 
situation  across  the  Internal  Market.  It  would  overcome  the  current  cooperation 
difficulties which exist between national FIUs. 

Stakeholders' views 

Only a small number of respondents expressed a clear view on this issue. Of those that did, 
there  was  general  support  for  the  idea  that  effective  co-operation  and  information  sharing 
between  FIUs  across  the  EU  was  important  and  should  be  treated  as  a  priority.    Several 
respondents strongly supported inclusion into the Directive of the proposals discussed at the 
FIU  platform.    This  support  was  however  in  some  cases  associated  to  the  view  that  the 
Directive  should  not  go  beyond  the  international  standards  regarding  international  co-
operation by calling for harmonisation, and that further experience of the impact of some new 
elements should be gained before going further in the harmonisation of powers at EU level. 

Conclusion 

The establishment of a single FIU would certainly be an efficient and cost effective means to 
ensure  reception,  analysis  and  dissemination  of  money  laundering  and  terrorist  financing 
reports  in  the  Internal  Market.  However  as  it  would  require  substantial  modifications  to 
Member  States'  legal  frameworks  and  existing  structures,  and  raise  concerns  about  Member 
States'  sovereignty,  the  Commission  has  a  clear  preference  for  option  2,  which  should 
nevertheless meet the operational objectives and result in increased effectiveness in the fight 
against ML/TF.  

103 

 
 
 
 
 
 
 
ANNEX IV:  COSTS OF COMPLIANCE WITH THE THIRD AMLD BY CROSS-BORDER 

BANKING GROUPS AT GROUP LEVEL (EXTRACT FROM THE COMMISSION 
STAFF WORKING DOCUMENT SEC(2009) 939 FINAL) 

The  cost  of  compliance  with  AML  requirements  is  not  insignificant  and  has  increased  in 
recent  years  following  the  regulatory  changes  introduced  in  the  EU,  notably  the  AML 
Directive117.  

A recent external study has examined for the Commission the cost impact of compliance for 
certain  types  of  firms  within  the  financial  industry  (including  banks)  with  six  key  EU 
directives in the financial services area, including the AML Directive118. The study focuses on 
the  so-called  ‘incremental  compliance  costs’  caused  by  regulation,  not  on  the  total  costs  of 
activities that happens to contribute to regulatory compliance119.  

The study separately identifies cost impacts that are of a one-off nature (i.e. those costs that 
only  have  to  be  incurred  once  in  making  the  transition,  such  as  IT  investment  and  the  re-
shaping of business processes) from those that are recurring in nature (i.e. on-going costs as a 
result of regulation). The ongoing costs of compliance for any given firm are typically lower 
than  the  one-off  costs.  Looking  at  the  different  sectors  surveyed,  recurring  costs  are  mostly 
between 15 and 20  per  cent  of  the  implementation cost recorded (with some  exceptions)120. 
Figure  IV.1  illustrates  this  divergence  in  scale,  by  showing  the  dispersion  of  the  results 
obtained for the AML Directive. 

This  study  shows  that  firms  have  adopted  different  strategies  in  approaching  the 
implementation of the Directive, both regarding one-off (in particular, in their willingness to 
put maximum reliance upon the automation of processes) and ongoing costs. The dispersion 
of  the  ongoing  costs  —  and  general  business  experience  —  suggest  that  firms  have 
experienced  mixed  results  in  terms  of  their  success  in  achieving  this  objective.  Indeed  the 
study shows a wide dispersion of results. 

117 

118 

119 

120  

See CRA International (2009), p.13. According to the KPMG survey of 2007, a range of European banks estimated that their AML 
compliance costs increased by 58% over the 2004-2007 period. This survey also predicts that costs will grow at a slower rate in 
the following years: indeed European banks expect these costs to increase by 27% between 2007 and 2010. This survey 
underlines the difficulty of estimating AML costs as they may be spread across many different functions (operations, 
compliance, risk) or regions, involve direct and indirect costs, and overlap with processes that are embedded in normal business 
practice (e.g. credit risk or customer relationship management). This survey does not make a distinction between one-off and 
on-going costs of compliance. See KPMG (2007), p.14 and seq. 

Europe Economics (2009). The survey concentrated on firms from four sectors within the financial services industry in the EU: 
banks and financial conglomerates, asset managers, investment banks and financial markets. The six directives concerned are 
the so-called Prospectus Directive, the Financial Conglomerates Directive, the Capital Requirements Directive, the Transparency 
Directive, the Markets in Financial Instruments Directive – MiFID and the AML Directive. These measures were part of the 
Commission’s Financial Services Action Plan (FSAP) of 1999 (the so-called 3rd AML Directive of 2005 replaced in the meantime 
the precedent, second, AML Directive of 2001 which was the measure addressed in the FSAP). 

Ibid., §2.14. For an explanation of the methodology of this study, see: section 2; the introductions to sections 4 and 5; as well as 
Appendix 1 of the final report. 

Ibid., §15 and seq.. 

104 

 
 
 
 
 
 
 
 
 
                                                            
Figure IV.1: Dispersion of one-off and ongoing costs of the AML Directive (expressed as a percentage of 
2007 operating expenses) 

12

11

6

5

4

3

2

1

0

s
t
s
o
c
g
n

i
t

a
r
e
p
o

f

o
%

one-off

ongoing

Source: Europe Economics (2009), figure 3. 

TABLE IV.1 – AML Directive – One-off costs of compliance121 

Banks & 
financial 
conglomerates 

Investment 
banks 

Asset 
managers 

Financial 
markets 

Mean122 (percentage of 2007 operating expenses) 

Median123 (percentage of 2007 operating expenses) 

0.29% 

0.31% 

0.23% 

0.32% 

0.21% 

0.24% 

0.16% 

0.03% 

financial  services  regulatory  compliance 

Total 
costs124 (percentage of 2007 operating expenses) 

2.90% 

2.25% 

1.58% 

3.40% 

Mean:  average  absolute  value  of  the  incremental 
cost changes, per firm (€000s) 

Total  financial services  regulatory compliance  costs 
(€000s)  

4,588 

2,507 

825 

33 

45,149 

24,569 

5,565 

694 

Average of operating costs (€000s) 

1,558,072 

1,030,071 

384,582 

20,403 

121  

122 

123 

124 

Source: Europe Economics (2009), tables 4.1, 4.2 and 4.3. 

The middle value in a series of data points arranged sequentially. The sequence from which this median has been selected is 
based upon the estimated one-off costs of compliance expressed as a percentage of the relevant firm’s more recent operating 
expenditure.  

Aggregate one-off costs of compliance expressed as a percentage of the relevant firms’ aggregated most recent operating 
expenditure. This implies that the experience of the larger firms will carry more weight in the sample presented. 

Including other FSAP measures and other financial services regulation, whether EU, nationally or extra-territorially derived. 

105 

 
 
 
 
 
 
 
 
  
 
 
                                                            
 
 
 
 
 
 
A) The one-off costs of compliance 

With  respect  to  one-off  costs  of  compliance  (see  Table  IV.1)  for  banks,  financial 
conglomerates and investment banks, compliance with the AML Directive roughly accounts 
for 10% of all their financial services regulatory costs.   

The  difference  in  costs  between  banks  and  financial  conglomerates  on  the  one  hand,  and 
investment banks, on the other, may be due to the typically different client make-up125. The 
study  also  notes  that  in  the  AML  field,  firms  voluntarily  practice  standards  that  are  applied 
globally, which adds to the costs resulting from the Third AMLD126. If a comparison is made 
with the costs of compliance for asset managers, Table IV.1 shows that the one-off costs of 
compliance  with  the  Third  AMLD  assume  a  higher  proportion  of  asset  managers’  total 
costs127. 

Out of the six Directives examined in the study, the Third AMLD ranks third in terms of cost 
impact  for  banks,  financial  conglomerates  and  investment  banks,  behind  the  Capital 
Requirements  Directive  and  MiFID.  These  two  other  Directives  represented  the  most 
important  regulatory  changes  in  this  area  in  recent  times  and  their  compliance  costs  are 
significantly  higher128.  The  study  identifies  the  possibility  for  firms  to  achieve  synergies 
between  some  of  the  requirements  in  the  AML  Directive  and  MiFID:  a  small  number  of 
institutions surveyed felt that synergies had been achieved (or could be achieved) between the 
“know-your-customer” requirements of the AML Directive and suitability tests of MiFID129. 
Nevertheless,  very  few  businesses  believed  that  any  significant  cost-reducing  synergies  had 
been  achieved  in  the  implementation  of  the  various  measures:  the  variation  in  the 
implementation dates was the most frequently cited factor behind this. Another component to 
this problem was that firms felt that the detail necessary to properly prepare for IT changes 
was  not  always  forthcoming  from  the  implementing  authorities  in  a  sufficiently  timely 
manner.  

The main source of  Third  AMLD-related compliance spending  is  on  IT (see Table IV.2 for 
banks and financial conglomerates and Table IV.3 for investment banks).130 Similarly high IT 
costs appear for almost all the Directives covered. 

125 

126  

127 

128 

129 

130 

Ibid., §4.10. The study also provides further breakdowns of costs, per size and geographical origin. See §4.20 to 4.25 and 4.93 to 
4.94. 

Ibid., §4.12 in fine. The non-EU regulation costs are reflected in the study, on an aggregated basis, in the total costs. 

Financial markets (e.g. stock exchanges operators) are not directly subject to the obligations of the AML Directive. But in order 
to allow for comparisons, their costs are also shown in Table IV.1. 

Ibid., tables 4.1, 4.2 and 4.3. The impact of MiFID costs doubles those of the AML Directive, while CRD accounts for more than 
half of the total financial services regulatory compliance. 

Ibid., §§4.14 to 4.17. This is also confirmed by the KPMG survey of 2007. See KPMG (2007), p.53. 

See generally, Ibid., §§4.57 to 4.62, and §§4.106 to 4.107. 

106 

 
 
 
 
 
 
 
 
 
 
 
                                                            
TABLE IV.2 – Cost drivers of the selected directives (banks and financial conglomerates) – one-off costs 

Directive
Familiarisation with Directive 
Consultancy fees
Legal advice 
Training 
Staff recruitment costs
Investment in/updating IT
Project management
Other 

Prospectus
49%
5%
23%
13%
0%
2%
8%
0%

Source: Europe Economics (2009), table 4.10. 

FCD
15%
11%
5%
8%
2%
47%
9%
2%

CRD Transparency
13%
5%
5%
11%
1%
63%
3%
0%

2%
20%
5%
5%
4%
57%
8%
0%

TABLE IV.3 – Cost drivers of the selected directives (investment banks) – one-off costs  

Directive
Familiarisation with Directive 
Consultancy fees
Legal advice
Training
Staff recruitment costs
Investment/ updating IT
Project management
Other

Prospectus
9%
13%
18%
14%
4%
27%
14%
0%

Source: Europe Economics (2009), table 4.27. 

FCD
7%
0%
10%
15%
0%
39%
29%
0%

CRD Transparency
7%
10%
4%
4%
10%
36%
29%
0%

3%
19%
2%
2%
1%
62%
10%
1%

MiFID
3%
13%
7%
15%
2%
52%
7%
0%

MiFID
6%
16%
4%
10%
1%
49%
14%
1%

3AMLD
3%
11%
1%
22%
2%
54%
7%
0%  

3AMLD
5%
12%
6%
13%
0%
53%
12%
0% 

In  terms  of  IT  spending131,  this  included  projects  designed  to:  (i)  meet  the  “Know-Your-
Customer”  informational  requirements,  such  as  some  adaptation  of  the  existing  Customer 
Relationship  Management  systems  and/or  some  new  data  entry  needed  to  meet  these 
increased  data  capture  requirements  (in  a  few  instances,  this  triggered  data  warehousing 
projects  to  enhance  inter-system  data  capture);  (ii)  facilitate  increased  monitoring  of 
suspicious transactions through increased automation of processes132; (iii) facilitate Politically 
Exposed Persons screening; and (iv) assist in risk assessment.  

Training  and  (for  larger  banks)  external  consultants  are  also  important  sources  of  cost. 
According to the study, the importance of training in the AML field is driven by it being more 
generally applicable than for the other Directives: in other words, the breadth of coverage of 
the  training  believed  to  be  necessary  to  comply  with  this  measure  was  greater  than  for  the 
others. There were also some costs associated with the re-design of training programmes and 
the roll-out of these133. 

These findings are fundamentally the same as those from a different (and qualitative) survey 
conducted in 2007. According to that survey, the drivers of higher expenditure in the 2004-
2007  period  appeared  to  be  greater  expenditure  on  transaction  monitoring  capabilities  and 
upgrades to existing systems, and the provision of additional tailored training to staff (in that 
survey there was no distinction between one-off and on-going costs).134 

131 

132 

133 

134 

Ibid., §§4.58 and 4.59. 

A different survey carried out in 2007 by a consultancy firm found that transaction monitoring is the single greatest area of AML 
expenditure for banks. See KPMG (2007), p.16 and 33. 

Europe Economics (2009), §§4.57 and 4.60. 

Respondent banks estimated the areas of greatest AML expenditure according to the following categories (the ranking is based 
on a maximum score of 5 for ‘very strong impact’ and a minimum score of 1 for ‘no impact’): enhanced transaction monitoring 
(4.1); greater provision of training (3.4); sanctions compliance (3.4); remediation of KYC documentation for existing customers 
(3.3); transaction ‘look-bank’ reviews (3.2); increased external reporting requirements 3.2); introduction of global procedures 
(3.0); more complex account-opening procedure (3.0); and increased internal reporting requirements (2.8). See KMPG (2007), 
p.16. 

107 

 
 
 
 
 
                                                            
The  study  notes  that  the  implementation  of  the  AML  Directive  remains  a  work-in-progress. 
Trans-national businesses have typically implemented their provisions on a group basis, either 
using the Directive itself as guidance or the implementation in their own Member State (if it 
had  been  implemented).  Their  expectation  is,  however,  that  additional  expenditure  will  be 
necessary  in  the  future  to  adapt  to  the  requirements  of  the  local  transposition.  Some 
participants argued that the uneven transposition situation represented a disincentive to early 
adoption135.  

B) The ongoing cost of compliance 

Concerning  the  ongoing  cost  of  compliance  (see  Table  IV.4)  for  banks,  financial 
conglomerates and investment banks, compliance with the Third AMLD roughly accounts for 
13% of all their financial services regulatory costs136. In relative terms, this is a slightly higher 
figure  than  the  one-off  cost  of  compliance,  possibly  explained  by  the  relatively  lower  on-
going costs of compliance with the Capital Requirements Directive and MiFID. In any event, 
as for the one-off costs, these two other Directives take up the bulk of the compliance costs, 
with  the  AML  Directive  ranking  third  out  of  the  six  Directives  examined  by  the  study.  If  a 
comparison  is  made  with  the  ongoing  cost  of  compliance  for  asset  managers,  Table  IV.4 
shows  that  the  ongoing  cost  of  compliance  with  the  AML  Directive  assumes  a  lower 
proportion  of  asset  managers’  total  costs,  which  is  explained  by  the  higher  ongoing  cost 
incurred by asset managers regarding MiFID and Prospectus Directive137.  

TABLE IV.4 – AML Directive – Ongoing cost of compliance 

Mean138 (percentage of 2007 operating expenses) 

Median139 
expenses) 

(percentage  of  2007  operating 

Total  financial  services  regulatory  compliance 
costs140 (percentage of 2007 operating expenses) 

& 

Banks 
financial 
conglomerates 

Investment 
banks 

Asset 
managers 

Financial 
markets 

0.08% 

0.09% 

0.05% 

0.08% 

0.07% 

0.07% 

0.13% 

0.00% 

0.59% 

0.38% 

0.85% 

1.70% 

Mean:  average  absolute  value  of  the  ongoing 
costs incurred, per firm (€000s) 

Total  financial  services  regulatory  compliance 
costs (€000s)  

1,195 

464 

278 

27 

8,540 

3,807 

2,532 

347 

Average of operating costs (€000s) 

1,558,072 

1,030,071 

384,582 

20,403 

Source: Europe Economics (2009), tables 5.1, 5.2 and 5.3. 

135 

136 

137 

138 

139 

140 

Europe Economics (2009), §4.62. 

The study also provides further breakdowns of costs, per size and geographical origin. See §§5.12 to 5.17 and 5.62. 

Financial markets (e.g. stock exchanges operators) are not directly subject to the obligations of the AML Directive. But in order 
to allow for comparisons, their costs are also shown in Table IV.4. 

The middle value in a series of data points arranged sequentially. The sequence from which this median has been selected is 
based upon the estimated ongoing costs of compliance expressed as a percentage of the relevant firm’s more recent operating 
expenditure.  

Aggregate ongoing costs of compliance expressed as a percentage of the relevant firms’ aggregated most recent annual 
operating expenditure. This implies that the experience of the larger firms will carry more weight in the sample presented. 

Including other FSAP measures and other financial services regulation, whether EU, nationally or extra-territorially derived. 

108 

 
 
 
 
 
 
 
 
 
 
                                                            
The most important ongoing costs of compliance associated with the Third AMLD concern IT 
expenditure and additional staff costs (see Table IV.5 for banks and financial conglomerates 
and Table IV.6 for investment banks).141 Most of the IT expenditure is linked to access costs 
to  various  databases  dedicated  to  the  tracking  and  screening  of  relevant  parties  such  as 
Politically  Exposed  Persons,  watch  lists  etc.  Whilst  some  firms  (generally  larger  banks)  see 
automation  as  the  only  way  to  provide  the  necessary  evidence  of  an  audit  trail  to  the 
regulatory  authorities  in  the  event  of  problems  arising  (as  well  as  being  cost  effective  by 
comparison  to  manual  effort),  a  number  of  firms  have  retained  significant  (or  total)  human 
oversight in this area.  

TABLE IV.5 – Cost drivers of the selected directives (banks and financial conglomerates) – ongoing cost 

Additional staff
Internal reporting
IT 
External reporting 
Training 
Audit
Other 

Prospectus
37%
2%
15%
16%
19%
10%
0%

FCD
6%
7%
6%
65%
4%
11%
0%

CRD Transparency
15%
43%
4%
8%
49%
26%
8%
10%
8%
6%
15%
7%
0%
0%

Source: Europe Economics (2009), table 5.10. 

TABLE IV.6 – Cost drivers of the selected directives (investment banks) – ongoing cost 

Directive
Additional staff 
Internal reporting
IT
External reporting
Training
Monitoring/audit
Other 

Prospectus
0%
0%
1%
48%
47%
3%
0%

FCD
0%
23%
35%
12%
31%
0%
0%

CRD Transparency
33%
34%
7%
7%
19%
32%
8%
10%
12%
6%
21%
10%
0%
0%

Source: Europe Economics (2009), table 5.27. 

MiFID
35%
7%
28%
10%
10%
9%
0%

MiFID
26%
6%
45%
13%
6%
4%
0%

3AMLD
37%
4%
31%
5%
13%
10%
0%  

3AMLD
23%
12%
29%
9%
16%
10%
0% 

Ongoing training is not an insignificant cost factor. However, it the study points out that once 
e-learning  or  class-based  training  modules  have  been  developed  (see  one-off  costs),  the 
ongoing requirements in cost terms is mitigated142. It is also noted that whereas large banks 
spent proportionately more than small banks on training as a one-off cost, the proportion of 
training within ongoing costs is lower. This would be consistent with larger banks being more 
reliant on e-learning and e-training.143 

141 

142 

143 

See generally, Ibid., §§5.34 to 5.40 and §5.69. 

Interviewees in the study were not in agreement as to whether the AML Directive increased the intensity of training required — 
i.e. whether or not the duration of the training sessions increased or were rolled out to a broader set of employees. See Ibid. 
§5.36. 

Some participants remain sceptical about e-learning generally. It is seen by such firms as a “quick fix”, in essence allowing 
maximum access to training for more people in less time. However, these firms considered it inevitable that it would require 
supplementation by more traditional (and more expensive) classroom-based approaches. See Ibid. §§5.37 and 5.38. 

109 

 
 
 
 
 
                                                            
ANNEX V:  SECTOR BY SECTOR ANALYSIS OF IMPACTS 

V.1. 

THE BANKING SECTOR 

General description of the Sector 

The  European  Banking  Sector  is  the  largest  in  the  world  with  over  6,800  institutions,  over 
three  million  employees  and  total  assets  of  over  40  trillion  EUR.  The  total  number  of  bank 
employees amounted to 3.2m144. In 2010, the total number of non-cash payments in the EU 
increased  by  4.4%  to  86.4  billion,  of  which  card  payments  accounted  for  39%  of  all 
transactions, while credit transfers accounted for 28% and direct debits for 25%145.  

Compliance costs 

Over  the  past  years  financial  institutions  made  important  investments  to  set  up  compliance 
departments and procedures to fight against money laundering and terrorism financing. One 
large  EU  bank,  with  several  hundred  thousand  employees  estimated  that  around  10%  of  its 
workforce was involved (fully or partially) in AML compliance work.  

Money Laundering in the Banking Sector (US)146 

In  March  2010,  a  US  bank,  Wachovia,  settled  the  biggest  action  yet  brought  under  the  US 
bank secrecy act.  In published court documents, across-the-board  failings  were  identified in 
the bank's AML system.  

Over  the  course  of  2004-2007,  Wachovia  conducted  transactions  with  Mexican  currency 
exchange houses (CDC's), allowing them to wire transfer funds through accounts at Wachovia 
to recipients throughout the world. According to the court documents, Wachovia did not have 
an effective anti-money laundering policy or procedure to monitor these transactions to detect 
and report potential money laundering activity. From May 2004 to May 2007, at least $373 
billion in wire transfers were made from the Mexican currency exchange houses to Wachovia 
accounts;  more  than  $4  billion  in  bulk  cash  was  transported  from  the  CDCs  in  Mexico  to 
accounts  at  Wachovia;  and  approximately  $47  billion  was  deposited  at  Wachovia  accounts 
through  a  “remote  deposit  capture”  service.  These  monies  included  millions  of  dollars  that 
were subsequently used to purchase airplanes for narcotics trafficking operations. Ultimately, 
more than 20,000 kilograms of cocaine were seized from these airplanes. 

According  to  the  information  and  other  documents  filed  with  the  court,  Wachovia  failed  to 
effectively monitor for potential money laundering activity more than $420 billion in financial 
transactions with the CDCs. 

The  bank  was  sanctioned  for  failing  to  apply  the  proper  anti-laundering  strictures  and  paid 
federal authorities $110m in forfeiture, for allowing transactions later proved to be connected 
to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons 
of cocaine. 

144  

145  

Statistics on Consolidated Banking Data, European Central Bank, reference end-June 2011 and end-June 2010 

Source: "EU Banking Sector: The world’s largest banking system in the world’s largest economic space. Facts and Figures 
2011/2012, European Banking ", European Banking Federation.  

146  

Source: The United States Attorney's Office, Southern District of Florida, Press Release, March 17th 2010 

110 

 
 
 
 
 
                                                            
V.2. 

THE PAYMENTS SECTOR 

General description of the Sector 

The total number of credit institutions and payment institutions in the EU offering payment 
services to non-monetary financial institutions in 2010 amounted to 8,604147.  

Compliance costs 

One Payment Institution has provided estimates for the cost applicable to Compliance/AML 
functions.  It  has  a  total  headcount  of  238  persons  dedicated  to  Compliance/AML  functions. 
This  does  not  include  headcount  relating  to  other  departments  that  closely  support  the 
Compliance/AML  function,  e.g.  the  Legal  and  Regulatory  Affairs  departments.  The  total 
headcount  of 
therefore 
Compliance/AML represents approximately 10% of the company’s total headcount.   

this  Payment  Institution's  group 

just  over  2400,  and 

is 

Additionally, other costs can be attributed to the running of our Compliance/AML function, 
e.g. the cost of external consultants, the cost of real estate to cater for the Compliance/AML 
personnel, IT costs relating to specific software/hardware needed for compliance reasons (e.g. 
use of external databases to verify customers’ ID). 

Terrorist  Financing  in  the  Payments  Sector  (Belgium  -  Informal  Money  remittance 
System) 

An  East  African  residing  in  Belgium,  Mr  X,  stated  that  he  performed  Hawilaad  banking 
activities.  His  account  was  exclusively  credited  by  cash  deposits  and  numerous  transfers  in 
small  amounts.  During  several  months  the  funds  were  transferred  to  company  A  in  Eastern 
Africa.  Shortly  afterwards  the  funds  were  transferred  to  company  B  in  Western  Europe. 
Companies  A  and  B  performed  money  remittance  transactions  around  the  globe.  Mr  X 
claimed that he performed Hawilaad activities for fellow countrymen wishing to send money 
to  Eastern  Africa.  However,  he  did  not  hold  any  position  within  Belgian  companies  and  he 
was not registered as manager of an authorised exchange office. The individual did not have 
an authorisation from the CBFA (banking supervisor) either. Police sources revealed that he 
was known to be a member of a terrorist organisation. In this case the alternative remittance 
system may have been used for terrorism financing.  

Money Laundering through money transmitters (France) 

An individual "A" residing in an Eastern Europe country received hundreds of funds transfers 
usually in small amounts through a money remitter service provider initiated by more than 35 
women of the same nationality as individual A. Typically the number of remittances initiated 
by each person was small (four on average). The addresses disclosed by the women referred 
to different hotels situated in Paris. Most of the women did not have a criminal  record and did 
not hold a bank account. One of the women however had opened bank account in France and 
indicated  as  her  address  the  address  of  a  company  whose  manager  was  convicted  for 
aggravated procurement some years ago. 

The  case  was  transmitted  by  Tracfin  (the  French  FIU)  to  the  judicial  authorities  on  a 
presumption of involvement in the procurement of prostitutes. 

147  

 Source: European Central Bank,  Payments statistics - INSTITUTIONS OFFERING PAYMENT SERVICES TO NON-MFIS 

111 

 
 
 
 
                                                            
Source: Money Laundering through Money Remittance and Currency Exchange Providers – 
2010 2011 Moneyval and FATF/OECD 

V.3. 

THE E-MONEY SECTOR 

General description of the Sector 

E-Money  can  be  issued  by  licenced  credit  or  financial  institutions,  or  else  by  specialist 
licenced  E-Money  institutions,  of  which  there  are  currently  around  35  such  institutions 
operating under the EU E-money licence148. Throughout the EU in 2010, total number of e-
money  purchase  transactions  stood  at  just  over  1  billion,  accounting  for  1.2%  of  the  total 
number of transactions149. 

The e-money product first introduced and in use is the 'electronic purse', which allows users 
to store relatively small amounts of money on a payment card or other smart card, to use for 
making small payments. E-money can also be stored on (and used via) mobile phones or in a 
payment account on the internet. In the latter case, funds are stored on a central server (e.g. at 
the  provider)  and  are  often  used  in  pre-funded  personalised  online  payment  schemes, 
involving  the  transfer  of  funds  stored  on  a  personalised  online  account  (not  including 
traditional  bank  deposits).  The  best-known  example  of  these  services  is  PayPal.  The 
advantage  for  consumers  is  that  it  allows  them  to  purchase  in  a  secure  way  on  the  internet 
without disclosing credit card details. Another increasingly popular e-money product is based 
on prepaid cards which are not linked to a bank account, but instead often used in conjunction 
with  online  accounts  for  purposes  such  as  e-gambling.  Card  issuers  using  the  MasterCard 
brand alone provide 11 million prepaid cards in the EU.150 

Compliance costs 

Compliance  costs  will  vary  considerably  according  to  each  business  model,  and  the 
Commission has received no publishable data in this respect.  

Given the often low  value  involved in  payment transactions, some representatives  of the E-
Money industry have expressed concerns about changes which would entail a need to conduct 
due  diligence  measures  at  an  early  stage  in  the  relationship  with  the  customer.  The  current 
simplified  regime  in  the  Third  AMLD  allows  Member  States  to  not  require  application  of 
CDD  in  the  case  of  E-money  where  a  non-rechargeable  device  where  the  maximum  stored 
value is €250, or in the case of rech argeable devices until a limit of €2,500. 

Money Laundering in the E-Money Sector 

Many New Payment Methods rely on a business model where face-to-face customer contact is 
minimal  or  non-existent.  This  can  facilitate  abuse  by  criminals  for  money  laundering 
purposes.  

148  

149  

150   

According to the E-Money Association 

Source: European Central Bank - payment and terminal transactions involving non-MFIs, total number of transactions: 5. E-
money purchase transactions 

Information retrieved from MasterCard comments to the Commission on the Third AML Directive. 

112 

 
 
 
 
                                                            
In some cases some shortcomings in some providers´ identification and verification processes 
and monitoring systems is likely to have contributed to the illegal activity going undetected 
for some time.  

Laundering of phishing activity proceeds through prepaid cards (Italy) 

In this case, prepaid cards are used as transit accounts where criminals sent funds from bank 
accounts  after  identity  theft  of  the  accounts’  holders.  The  phisher  pretended  to  be  the  bank 
account holder and sent funds to the prepaid card that was issued in the name of a strawman. 
After the funds were transferred to the card, a corresponding amount of cash was withdrawn 
at ATMs.  

Laundering  of  counterfeiting  and  fraud  proceeds  through  open-loop  prepaid  cards 
(Belgium) 

Within  a  few  months,  the  accounts  of  Mr.  POL  and  company  BE  were  credited  by 
international  transfers  for  some  €  500  000  fr om  a  Swiss  company  acting  as  an  agent  and 
trader in securities. These funds were used to load prepaid cards. In most cases, these cards 
were loaded with € 5 000 (maximum limit). Mr . POL claimed to have loaded these prepaid 
cards because he had given them to his staff for professional expenses. As soon as the money 
was  loaded  on  the  cards,  the  card  holder  quickly  withdrew  the  money  by  repeatedly 
withdrawing cash from ATM machines.  

Mr. POL was the subject of a judicial investigation regarding counterfeiting and fraud. Given 
the  police  information  on  Mr.  POL,  the  funds  from  Switzerland  may  have  been  of  illegal 
origin  and  linked  to  the  fraud  and  counterfeiting  for  which  Mr.  POL  was  known.  This 
hypothesis was confirmed by the ingenious scheme (international transfers, prepaid cards and 
cash withdrawals) used to repatriate funds to Belgium.  

Source: FATF report: Money Laundering Using New Payment Methods October 2010 

V.4.  ACCOUNTANTS AND EXTERNAL AUDITORS 

General description of the Sector 

With  respect  to  external  accountants,  a  recent  survey  carried  out  by  FEE  ,  the  national 
professional  institutes  of  accountants  and  auditors  across  30  European  countries  (27  EU 
Member  States  plus  Croatia,  Iceland  and  Norway)  quantified  total  membership  at  around 
700.000 members. Some of these members also provide tax advice. 

Professional accountants provide a wide range of - sometimes mutually exclusive - services, 
including preparation of financial information, tax services, statutory audit, as well as many 
innovative  services  in  the  areas  of  non-financial  reporting,  assurance  services  other  than 
statutory  audit,  sustainability  and  corporate  social  responsibility,  strategy  and  management 
consultancy and corporate governance.  

With  respect  to  the  audit  profession,  there  are  estimated  to  be  over  230,000  approved 
statutory auditors and audit firms in the EU151. 

151  

European Commission, impact assessment accompanying the proposal for a Directive amending Directive 2006/43/EC on 
statutory audits of annual accounts and consolidated accounts: Annex 3 –Approved statutory auditors and audit firms, 
SEC(2011) 1384 final. 

113 

 
 
 
 
                                                            
Compliance costs 

One large UK-based accountancy firm has estimated AML compliance costs as follows:   

The  compliance  team  consists  of  an  equity  partner  (30-50  %  of  their  time),  a  director  (full-
time) a senior manager and 5 other assistants.  In addition, a team of around 100 other staff 
work in back office compliance.   

Web based training courses cost c£100,000 which is cost effective for around 15,000-16,000 
staff.  

Customer Due Diligence checks take around 0.5 – 1 hour for a "normal" client, and up to a 
day or 2 even days for more complex corporate/trust clients. 

Source – meeting report with the Accountancy sector. 

Money Laundering involving accountants and tax advisors (The Netherlands) 

The  Tax  Administration  and  the  Fiscal  Intelligence  and  Investigation  Service  discovered 
activities involving the allocation of securities as a means to effect tax fraud. These activities 
involved the use of false documents, in violation of tax and criminal laws. The cases involved 
different  players  in  the  financial  sector;  involving  employees  of  financial  institutions  along 
with accountants and tax advisors.  

The  cases  investigated  have  in  common  the  misuse  of  a  normal  and  legitimate  service 
provided  by  banks,  broker-dealers  and  other  institutions  licensed  to  trade  in  securities:  the 
ability to transfer securities held electronically.  

The  misuse  in  the  Dutch  cases  was  triggered  by  a  difference  in  the  way  capital  gains  and 
losses were treated for the income and corporate tax purposes. In short, capital losses are not 
deductible  for  income  tax  purposes,  but  are  included  in  the  tax  base  for  corporate  tax. 
Individuals  transferred  securities  between  their  personal  portfolio  and  a  corporate  securities 
portfolio over which they had control. Depending on what was necessary in the specific case, 
securities  were  transferred  in  either  direction.  In  the  case  of  a  loss  that  occurred  in  the 
personal portfolio, the relevant securities were transferred to the corporate stock portfolio and 
vice versa.  

Source: Money laundering and terrorist financing in the securities sector October 2009 FATF 

http://www.fatf-
gafi.org/media/fatf/documents/reports/ML%20and%20TF%20in%20the%20Securities%20Se
ctor.pdf 

V.5. 

THE INSURANCE SECTOR 

General description of the Sector 

In  the  insurance  sector,  total  life  insurance  premiums  end  2010  amounted  to  €676  billion; 
there  were  over  5000  insurance  companies  (end  2010)  and  close  to  one  million  employees 
working in the insurance sector (life + non-life combined). 

114 

 
 
 
 
 
 
Compliance costs 

In general, insurance firms need to make large investments in order to comply with the AML 
rules.  Insurance  Europe  has  provided  the  following  estimates  for  the  current  cost  of 
compliance in several markets: 

•  The Association of British Insurers estimates the current cost of compliance of one of 
its  members.  In  terms  of  staffing,  annual  costs  for  6  full  time  equivalent  posts  are 
estimated at £400,000 per annum.  An additional 55 people who devote part of their 
time  to  active  AML  controls  are  estimated  at  £250,000  per  annum.  In  addition, 
automated  electronic  controls  instigated  over  the  past  4  years  cost  an  additional 
£6m.  

•  Most insurers have made investments in automatic detection systems (recommended 
at  least  for  larger  insurers  in  Belgium  by  the  Belgian  supervisory  authority).  In 
addition, insurers are also obliged to (continuously) train their employees on the risks 
of money laundering through insurance. The more fundamentally the system changes 
the  more  costs  the  insurers  will  incur  as  they  will  be  obliged  to  update  their  whole 
system, their training programmes for employees etc. 

•  For the Netherlands, the following cost indications were provided:  

o  ABZ is an IT supplier in the Dutch insurance sector: the higher the number of 
records  that  have  to  be  dealt  with  by  ABZ,  the  higher  the  category  of  costs 
ABZ  will  charge.  Categories  vary  from  1  to  10.  One  Dutch  insurer  has  20 
million  records  in  total  which  need  to  be  checked  6  times  per  year  (a 
requirement  of  the  Dutch  Supervisor).  Consequently  this  means  that  120 
million  records  need  to  be  checked  per  year,  for  which  ABZ  will  charge 
according  to  category  10:  costs  of  such  an  audit  will  reach  €  100,000.  In 
addition to these costs, costs for licenses per user/business and cost of the PEP 
list will be also charged.  

o  The  estimated  increase  in  online  checking  costs  would  be  €  500,000  to 
1,000,000.  Furthermore,  internal  handling  costs  for  PEP  reports  from 
inspections  are  estimated  at  16,000  reports  per  year  (assuming  10%  of  the 
PEP-list which consists of 160,000 PEPs) and continuous monitoring (estimate 
3 for three full time employees = 3 x 50,000 = € 150,000).  

Insurance Europe has indicated that in many EU countries, the current AML regime for the 
insurance sector has resulted in higher costs in terms of resources, unnecessary and inefficient 
use of resources, and which did not appear helpful in terms of law enforcement. They argue 
that  resources  should  have  been  best  used  and  applied  only  to  those  products  that  actually 
present a risk for ML/TF.  

However Insurance Europe also believes that the expansion of the RBA across all anti-money 
laundering areas will result in a sound and logical asset and resource allocation to those areas 
where the real risk of money laundering exists. This could be a real improvement, especially 
with regard to very labour intensive measures such  as identification of  beneficial owners or 
Politically  Exposed  Persons  (PEPs).  The  RBA  enables  companies  to  focus  ML  compliance 
resources where there is the greatest ability to be helpful to law enforcement, provided there is 
a  strong  requirement  that  insurance  companies  have  completed  and  documented  a  detailed 
ML risk assessment of their own products and business. 

115 

 
 
 
 
Money Laundering through the Insurance sector (Bulgaria) 

A single premium on a life policy, totalling more than €500,000 wa s paid on behalf of Mr A 
by Mr A’s employer, who was a related person. 

Half of the amount was withdrawn by Mr A within a month of paying the premium. A request 
for withdrawing the balance of the amount was filed at the same time. 

In follow-up to a report to the FIU, checks revealed that Mr A had a criminal record and was 
involved in pending legal proceedings. It also emerged that Mr A was allegedly involved in 
drug dealing and assassinations. Following further investigation and collection of information, 
including  tax  records,  CTRs,  and  movements  of  funds  on  Mr.  A’s  accounts  the  relevant 
information was forwarded to law enforcement agencies. 

Source:  Typology  research:  Money  laundering  through  private  pension  funds  and  the 
insurance sector – October 2010. 

http://www.coe.int/t/dghl/monitoring/moneyval/typologies/MONEYVAL(2010)9_Reptyp_full_
en.pdf 

V.6. 

LAWYERS/NOTARIES 

General description of the Sector 

With respect to notaries, the total number in the EU is estimated to be around 38,500152. 

With respect to the number of independent legal professionals, the total number is estimated 
to be around 900,000 (2008)153. 

Compliance costs 

Representatives  of  the  legal  and  notary  professions  have  indicated  that  cost  of  compliance 
with AML/CFT rules is a key concern.   

•  Notaries have  indicated  that the principal  costs  of  compliance  stem  from  technology 

(building systems) and external costs (such as subscribing to PEPs databases).  

•  Lawyers  have  in  particular  highlighted  the  time  cost  in  dealing  with  compliance 
issues, with what is perceived as little added value for AML, as the vast majority of 
their cases are lower risk.   

Representatives  of  both  professions  have  felt  that  the  burden  falls  more  greatly  on  small 
businesses, although they did not disagree that smaller firms do not necessarily always have 
lower risk clients154.   

Money Laundering involving a Lawyer (Spain) 

A lawyer created several companies on the same day (with ownership through bearer shares, 
in  order  to  conceal  the  identity  of  the  true  owners).  One  of  these  companies  acquired  a 

152  

153  

154  

Source: Notaires d'Europe 

Council of Bars and Law Societies of Europe, CCBE Brochure 2010, Nombre d'avocats dans les pays membres 2008. 

Source  - meeting report with lawyers and notaries on 24 May 2012 

116 

 
 
 
 
 
                                                            
property that was an area of undeveloped land. A few weeks later, the area was re-classified 
by the town hall where it was located so that it could be urbanised.  

In successive operations at the Property Registry, the lawyer transferred the ownership of the 
property by means of the transfer of mortgage loans constituted in entities located in offshore 
jurisdictions.  

With  each  successive  transfer  of  the  property,  the  price  of  the  land  was  increased.  The 
participants in the individual transfers were shell companies – also controlled by the lawyer. 
Finally  the  mortgage  was  cancelled  through  payment  by  cheque  issued  by  a  correspondent 
account. The cheque was received by a company different from the one that appeared as the 
acquirer on the deed (cheque endorsement). Since the company used a correspondent account 
exclusively, it could be concluded that this company was a front company set up merely for 
the purpose of carrying out the property transactions.  

After further investigation, it emerged that the purchaser and the seller were one and the same 
person:  the  leader  of  a  criminal  organisation.  The  money  used  in  the  transaction  had  illicit 
origins  (drug  trafficking).  Additionally,  in  the  process  of  reclassification,  administrative 
anomalies and bribes were detected.  

Source:  ML/TF through the real state sector FATF June 2007 

http://www.fatf-
gafi.org/media/fatf/documents/reports/ML%20and%20TF%20through%20the%20Real%20Es
tate%20Sector.pdf 

V.7. 

THE GAMBLING SECTOR 

General description of the Sector 

The overall size of the gambling market, measured in terms of "Gross Gaming Revenues" (i.e. 
stakes minus winnings) is equal to €71.9 bln  (off-line) and €8.5 bln  (on-line) in 2010. The 
market share of on-line business is growing rapidly. 

With respect to Casinos, there were an estimated 800 casinos operating in the EU, employing 
60,000 staff. Lotteries employ 19,000 staff, while the gaming and amusement machines and 
devices sector (not casinos) employ 245,000 staff. 

Compliance costs 

The European Casino Association (ECA) have provided individual anonymous data for 
compliance costs under the Third AMLD for two casinos (Casino A and Casino B)155:  

155  

Source European Casino Association response to the European Commission questions relating to the review of the third Anti 
Money Laundering Directive, 3 October 2011. 

117 

 
 
 
 
                                                            
Money Laundering Typology in the gambling sector 

Money laundering in a Casino (UK) 

One money laundering conspiracy involved millions of UK pounds from organised criminal 
gangs  being  laundered  by  a  group  of  men  from  West  Midlands.  The  money  laundered 
included  the  profits  from  a  number  of  activities  including  drug  trafficking,  multi-million 
pound VAT conspiracies in the mobile phone industry, counterfeiting and credit card fraud. 
The monies were a mixture of Scottish and English notes. The defendants would transfer large 
amounts  of  money  to  a  back  account  in  Dubai,  which  would  then  be  accessed  by  their 
associates.  The  defendants  received  the  proceeds  of  crime  in  the  UK  and  made  equivalent 
amounts of criminal monies available in Dubai. They then utilised the gambling industry to 
launder  the  money.  Money  was  placed  on  a  deposit  at  a  casino  and  withdrawn  a  day  or  so 
later. Other sums would be gambled. Thousands of pounds would be passed over the tables in 
order to disguise the original source of the banknotes. Monies gambled or exchanged at the 
casino provided the defendants with an apparently legitimate explanation as to their source. 

Source: FATF report: Vulnerabilities of casinos and gaming sector (March 2009) 

V.8.  REAL ESTATE SECTOR 

General description of the Sector 

The  total  number  of  real  estate  agents  has  been  quantified  by  Eurostat  at  1.3  million 
enterprises and 3.3 million employees (2009)156. 

156  

Source: Eurostat, Real estate, renting and leasing statistics - NACE Rev. 1.1, 2009 data 

118 

 
 
 
 
 
 
 
 
                                                            
Money Laundering in the Real Estate Sector ("THE WHITE WHALE CASE")157 

In  Spain,  drug-trafficking  proceeds  were  laundered  through  a  scheme  involving  shell 
companies  and  investments  in  the  real  estate  sector.  Beneficial  ownership  was  kept  hidden 
and notaries and lawyers were misused. Despite the fact that there were suspicions of money 
laundering (incorporation of several companies by the same persons within a short period of 
time,  same  partners  in  several  companies,  several  real  estate  purchases  in  a  short  period  of 
time, etc.) and although public notaries were obliged to report under the Spanish anti-money 
laundering law, transactions were not disclosed to the Spanish FIU 

The launderer transferred funds from a foreign country to a non-resident account owned by a 
Spanish company. The funds were pooled in the account of the Spanish company under the 
guise  of  foreign  loans  received.  At  the  final  stage  of  the  process,  the  funds  were  used  to 
purchase real estate properties in the name of the Spanish company, with the identity of the 
money launderer and the beneficial owners remaining hidden. 

The  off-shore  companies  involved  in  this  case  were  “shell  companies”  established  in  a  US 
State  whose  laws  allow  a  special  tax  regime  for  such  companies  and  for  their  transactions. 
The  companies  were  pre-constituted  in  the  name  of  an  agent  (usually  a  lawyer)  before  the 
incorporation of the company, with the document of incorporation of the company remaining 
inactive in the hands of the agent until the company was purchased by a client. 

The total amount of money laundering from drug trafficking and prostitution was estimated at 
€250 million. 

Source: FATF report: The misuse of corporate vehicles, including trust and company service 
providers (2006) 

157  

Source: FATF report: The misuse of corporate vehicles, including trust and company service providers (2006) 

119 

 
 
 
 
                                                            
ANNEX VI:  MEMBERSHIP OF FATF AND MONEYVAL 

The Financial Action Task Force – the standard setter for international AML/CFT rules 

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 
by the Ministers of its Member jurisdictions.  The objectives of the FATF are to set standards 
and  promote  effective  implementation  of  legal,  regulatory  and  operational  measures  for 
combating  money  laundering,  terrorist  financing  and  other  related  threats  to  the  integrity  of 
the  international  financial  system.    The  FATF  is  therefore  a  “policy-making  body”  which 
works to generate the necessary consensus to bring about national legislative and regulatory 
reforms in these areas. 15 EU Member States158, as well as the European Commission, are full 
members of FATF. 

Membership 

Argentina 

Australia 

Brazil 

European 
Commission 

Greece 

India 

Canada 

Finland 

Gulf 
Council 

Ireland 

Austria 

China 

France 

Belgium 

Denmark 

Germany 

Co-operation 

Hong Kong, China 

Iceland 

Italy 

Japan 

Republic of Korea   

Luxembourg 

Mexico 

Netherlands, 
Kingdom of 

New Zealand 

Norway 

Portugal 

Russian Federation 

Singapore 

South Africa 

Spain 

Sweden 

Switzerland 

Turkey 

United Kingdom 

United States   

158  

BE, DK, DE, GR, ES, FR, IE, IT, LU, NL, AT, PT, FI, SE, UK 

120 

 
 
 
 
 
 
 
 
 
 
  
                                                            
Moneyval159 – the Committee of Experts on the Evaluation  of Anti-money Laundering 
Measures and Financing of Terrorism 

The  aim  of  Moneyval  is  to  ensure  that  its  member  states  have  in  place  effective  systems  to 
counter money laundering and terrorist financing and comply with the relevant international 
standards in these fields. Moneyval currently comprises 30 members which are subject to its 
evaluation  processes  and  procedures,  including  12160  EU  Member  States  which  are  not 
members of FATF. 

Membership 

Albania 

Andorra 

Armenia 

Azerbaijan 

Bosnia 
Herzegovina 

and 

Bulgaria 

Croatia 

Cyprus 

Czech Republic 

Estonia 

Georgia 

Hungary 

Holy  See  (since  April 
2011) 

Israel 
January 2006) 

(since 

Latvia 

Moldova 

Romania 

Liechtenstein 

Monaco 

Federation 
Russian 
(also  FATF  member 
since 2003) 

Slovak Republic 

Slovenia 

Lithuania 

Montenegro 

San Marino 

“The 
former 
Yugoslav  Republic  of 
Macedonia” 

Malta 

Poland 

Serbia 

Ukraine 

159  

160  

Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism. 

BG, CZ, EE, CY, LV, LT, HU, MT, PL, RO, SI, SK 

121 

 
 
 
 
 
 
 
 
 
 
 
  
  
 
  
  
                                                            
ANNEX VII: EFFORTS TO MEASURE EFFECTIVENESS OF AML MEASURES BY THE 

COMMISSION 

Important  first  steps  to  measuring  the  effectiveness  of  AML  measures  through  the 
establishment  of  a  set  of  indicators  have  been  taken  by  DG  HOME  and  EUROSTAT,  in 
recognition of the need to develop better statistical knowledge at national and European level 
and  to  provide  a  more  precise  and  reliable  diagnosis  of  the  criminal  threat.  “Money 
Laundering  in  Europe”161  is  one  of  the  fruits  of  a  2006-2010  action  plan  entitled 
“Developing  a  comprehensive  and  coherent  EU  strategy  to  measure  crime  and  criminal 
justice”.  The  publication  represents  a  first  step  towards  enabling  a  cost/benefit  analysis  of 
anti-money  laundering  provisions,  which  would  feed  into  and  clarify  not  only  political 
decision-making, but also operational cooperation.  

While  recognising  the  limitations  -  resulting  from  the  different  approaches  and  set-ups  at 
national  level  for  the  combat  against  money  laundering  –  of  making  cross-country 
comparisons,  the  report  paints  a  useful  picture  of  Member  States’  efforts  in  this  field.  The 
report contains data on the number of suspicious transaction reports (STRs) filed, according to 
each category of obliged entity, how many reports were sent to law enforcement, how many 
staff are dedicated to full-time AML work within FIUs, how many cases were initiated by law 
enforcement  agencies  on  the  basis  of  STRs  received,  the  number  of  cases  brought  to 
prosecution,  the  number  of  persons/legal  entities  convicted  for  money  laundering  offences, 
the number of sentences by type for money laundering offences, etc.  

Further development is planned to improve data quality in future collections.      

Another  important  initiative  aimed  at  assessing  effectiveness  is  the  "ECOLEF"  project:  the 
Commission  (DG  HOME),  is  currently  funding  research  on  the  economic  and  legal 
effectiveness  of  the  anti-money  laundering  and  combating  terrorist  financing  policy  in  the 
European Union under the lead of Utrecht University162. It aims at establishing a framework 
for  an  encompassing  cost  benefit  analysis  for  evaluating  anti-money  laundering  and 
combating 
threat 
assessments. Its aim is to give financial investigators and policy makers a further sustainable 
tool to identify and combat ML and TF. The final Report on the ECOLEF project is expected 
for late 2012.  

terrorist  financing  (AML-CFT)  policy,  which 

includes  countries' 

161  

162  

 ISSN 1977-0375, Eurostat Methodologies and Working Papers, Cynthia Tavares, Geoffrey Thomas and Mickaël Roudaut, 2010 
edition. 

This research is funded by the European Commission's "Prevention of and Fight against Crime (ISEC) Programme (no. of the 
project JLS/2009/ISEC/AG/087) 

122 

 
 
 
 
                                                            
ANNEX VIII:  COMPARISON OF EU MEMBER STATES' SANCTIONS AND PENALTIES FOR 

NON-COMPLIANCE WITH AML/CFT RULES

163 

According to article 39 (1) of the AML Directive, Member States shall ensure that natural and 
legal  persons  covered  by  the  AML  Directive  can  be  held  liable  for  infringements  of  the 
national  provisions  adopted  pursuant  to  this  Directive.  The  penalties  must  be  effective, 
proportionate and dissuasive. 

Article 39 (2) provides that Member States shall ensure, in conformity with their national law, 
that the appropriate administrative measures can be taken or administrative sanctions can be 
imposed against 
credit and financial institutions for infringements of the national provisions adopted pursuant 
to this 
Directive.  Member  States  are  entitled  to  impose  criminal  sanctions,  but  are  however  not 
obliged to 
incorporate them into their national legislation. 

Member States have transposed article 39 (1) of the AML Directive as follows: 

•  All Member States have incorporated administrative penalties, as prescribed by article 

39 (2) of the AML Directive. 

•  All Member States have incorporated administrative measures as well. 
•  Although no obligation exists for Member States to foresee criminal sanctions in case 
of  non-compliance  with  the  national  AML  legislation,  twenty  Member  States  have 
incorporated criminal sanctions. 

Table: Overview of administrative penalties, administrative measures and criminal 
sanctions in Member States 

Administrative penalties 

Administrative measures 

Criminal sanctions 

Austria (AT) 

Belgium (BE) 

Bulgaria (BG) 

Cyprus (CY) 

Czech Republic (CZ) 

Denmark (DK) 

Estonia (EE) 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

- 

-  

X 

- 

X 

X 

X 

163  

Extract from the study by Consultants Deloitte on the application of the Anti-Money Laundering Directive, Section 3.16: 
Penalties, January 2011. 

123 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
Finland (FI) 

France (FR) 

Germany (DE)  

Greece (EL) 

Hungary (HU) 

Ireland (IE) 

Italy (IT)  

Latvia (LV) 

Lithuania (LT) 

Luxembourg (LU)  

Malta (MT) 

Netherlands (NL) 

Poland (PL) 

Portugal (PT) 

Romania (RO) 
Slovenia (SI) 

Slovakia (SK)  

Spain (ES) 

Sweden (SE) 

United Kingdom 
(UK) 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

X 

- 

X 

X 

X 

X 

- 

- 

X 

X 

X 

X 

X 

X 
- 

X 

X 

X 

X 

Comparability of the penalties 

A high level scan of administrative penalties, administrative measures and criminal penalties 
indicates  that  penalties  throughout  Member  States  are,  with  the  exception  of  administrative 
measures, hardly comparable: 

•  Administrative  measures:  in  general  the  order  for  appropriate  measures  and  warning 

letters are commonly incorporated in the legislation of Member States. 

•  Administrative  penalties:  in  general  two  types  of  administrative  penalties  are  commonly 

incorporated in the legislation of Member States: 

o  Administrative  fines:  the  range  in  administrative  fines  is  very  large  e.g.  in  the 
Netherlands and in Belgium, fines up to 4.000.000 EUR and EUR 1.250.000 are 

124 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
possible;  in  Estonia  and  Italy,  fines  can  only  amount  to  a  maximum  of  500.000 
croon (31.955 EUR)164 and 50.000 EUR. 

o  Other  administrative  penalties:  the  possibility  to  suspend  or  revoke  a  licence 
and/or  impose  a  public  warning  are  retrieved  commonly  throughout  Member 
States. 

•  Criminal  sanctions:  both  imprisonment  sentences  and/or  fines  are  found  throughout 

the Member States: 

o  Imprisonment  sentences  are  foreseen  in  for  example:  Denmark,  Greece, 
Hungary, Ireland, Poland, Slovakia, the Netherlands and the United Kingdom. 
In  Slovakia  an  imprisonment  sentence  up  to  8  years  is  foreseen  in  case  an 
unusual business operation was not reported in breach of a person’s duty165. 
o  Fines  are  foreseen  in  for  example:  Estonia,  Ireland  Luxemburg,  the 

Netherlands and the United Kingdom.  

Publication and application of penalties in practice  
In  almost  all  Member  States166  penalties  can  be  published  and  therefore  penalties  can  be 
publicly available.  

The publication is however not an automatism due to the fact that: 

• 
• 

• 

In some Member States, the publication must be ordered separately (e.g. Belgium); 
In  some  Member  States,  the  publication  is  only  performed  in  case  of  the  most  serious 
infringements (e.g. Italy); 
In  some  Member  States,  the  publication  is  directly  related  to  the  nature  of  the  sanction 
itself (e.g. Spain). 

Example: publication by separate order of publication (Belgium) 

Article 40 AML Law 

Without prejudice to other laws or regulations, the competent authority referred to in Article 
39 may, in case of non-compliance by institutions or persons referred to in Articles 2, § 1, 3 
and 4 of the Articles 7 to 20, 23 to 30 and 33 of this Law, with Regulation No 1781/2006 of 
the European Parliament and the Council of 15 November 2006 on information on the payer 
accompanying transfers of funds or with their implementing decrees: 

1  °    publish,  in  accordance  with  terms  it  determines,    the  decisions  and  measures  it  shall 
adopt; 

164    

As of 1.1.2011, the amount will be set at 32.000 EUR.  

165   According to article 234 of the Penal Code. 

166   No publication possibilities were reported in Bulgaria, Czech Republic, Germany, Latvia, Slovenia 

125 

 
 
 
 
 
 
 
                                                            
2  °  impose  an  administrative  fine  of  not  less  than  250  EUR  and  no  more  than  1.25  million 
EUR, equal after hearing the defence of the institutions and persons or at least having duly 
summoned them… 

Example: publication only for the most serious infringements (Italy) 

Article 57 AML Law 

1. Unless the act constitutes a crime, failure to comply with the suspension measure referred 
to in Article 6(7)(c) shall be punished with a fine of from €5,000 to €200,000. 

2. Failure to create the single electronic archive referred to in Article 37 shall be punished 
with  a  fine  of  from  €50,000  to 
€500,000.  In  the  most  serious  cases ,  taking  account  of  the 
gravity  of  the  violation  inferred  from  the  circumstances  in  which  it  occurred  and  from  the 
value  of  the  suspicious  transaction  that  was  not  reported,  the  provision  imposing  the 
sanctions  shall  be  accompanied  by  an  order  that  the  persons  fined  publish,  at  their  own 
initiative  and  cost,  the  decree  imposing  the  sanction  in  at  least  two  newspapers  distributed 
nationwide, of which one shall be a financial paper. 

3. Failure to set up the customer register referred to in Article 38 or to adopt the recording 
procedures referred to in Article 39 shall be punished with a fine of from €5,000 to €50,000. 

4.  Unless  the  act  constitutes  a  crime,  failure  to  report  suspicious  transactions  shall  be 
punished with a fine of from 1 to 40 per cent of the amount of the non-reported transaction. In 
the  most  serious  cases,  taking  account  of  the  gravity  of  the  violation  inferred  from  the 
circumstances in which it occurred and from the value of the suspicious transaction that was 
not reported, the provision imposing the sanction shall be accompanied by an order that the 
persons fined publish, at their own initiative and cost, the decree imposing the sanction in at 
least two newspapers distributed nationwide, of which one shall be a financial paper. 

5. Violations of the disclosure requirements in respect of the FIU shall be punished with a fine 
of from €5,000 to €50,000. 

Example: publication which is directly related to the nature of the sanction (Spain) 

Article 56 AML Law 

1. For the commission of very serious offences, the following penalties may be imposed: 

(a) Public reprimand. 

(b) Fine between a minimum of EUR 150,000 and a maximum amount that may be imposed 
up  to  the  highest  of  these  figures:  5  percent  of  the  net  worth  of  the  institution  or  person 
covered by this Act, twice the economic substance of the transaction, or EUR 1,500,000. 

126 

 
 
 
 
 
 
(c)  In  the  case  of  institutions  requiring  administrative  authorisation  for  their  operation, 
withdrawal of this authorisation. 

The penalty provided for in point (b), which will be compulsory in all events, shall be imposed 
simultaneously with one of those listed in points (a) or (c). 

2. In addition to the applicable penalty to be imposed on the institution or person covered by 
this 

Act for the commission of very serious offences, one or more of the following penalties may be 
imposed  on  those  responsible  for  the  offence,  having  held  administrative  or  management 
positions in the entity: 

(a) Fine for each of between EUR 60,000 and EUR 600,000. 

(b)  Removal  from  office,  with  disqualification  from  holding  administrative  or  management 
positions in the same entity for a maximum period of ten years. 

(c)  Removal  from  office,  with  disqualification  from  holding  administrative  or  management 
positions in any entity of those covered by this Act for a maximum period of ten years. 

The  penalty  provided  for  in  point  (a),  which  will  be  compulsory  in  all  events,  may  be 
simultaneously imposed with one of those listed in points (b) and (c). 

The public availability of penalties in practice is limited. Moreover, throughout our surveys 
we  have  noticed  that  figures  on  the  imposed  penalties  were  practically  never  provided. 
Information  on  the  facts  on  the  infringements  which  gave  rise  to  the  penalties  is  also  very 
scarce.  

The  fact  that  penalties  are  applied  in  practice  is  supported  by  a  study  from  the  Universita 
Degli Studi di Trento and the Universita Cattolica del Sacre Cuore (2007) 167. 

Application in practice was also confirmed by a number of other indications: 

•  E.g. an Italian public layer sector stakeholder who reported that penalties are applied 
in practice in 2010. The Italian legal system has an extensive range of (criminal and 
administrative) sanctions to punish infringements of AML rules.  
The Bank of Italy, as supervisory authority, has made an extensive use of 
administrative sanctions, both pecuniary and coercive (e.g., prohibitions, bans, etc.), 
following to controls on supervised entities.  

167   Report on Cost Benefit of Transparency Requirements in the Company/Corporate Field and Banking Sector Relevant for the Fight 

Against Money Laundering and Other Financial Crime (2007), 103 (available at: http://transcrime.cs.unitn.it/tc/fso/publications/CBA-
Study_Final_Report_revised_version.pdf) . 

127 

 
 
 
 
                                                            
•  A  desk  research  on  the  number  of  imposed  penalties168  and  reports  from  other 
stakeholders  confirmed  as  well  that  penalties  are  applied  in  practice  throughout 
Member States169.  

Contrary to the above, the FATF reported with regard to a Member State where (only) a low 
number of warning letters were sent by the supervisor (supervisor over a very large number of 
controlled entities) and in the absence of administrative fines, that it is unlikely that there is 
such a very high level of compliance with AML/CFT measures. 

Effect of penalties 

Almost  all  public  layer  sector  stakeholders  reported  that  the  available  sanctions  are 
sufficient and proportionate to the severity of the breach e.g.: 

• 

• 

• 

• 

• 

• 

• 

• 

In Germany, a stakeholder emphasized the importance of administrative sanctions 
and measures for the supervisory authorities. 
In Hungary, a stakeholder reported that in its own experience the existing range of 
sanctions and measures is appropriate to the level of actual threat. 
In Luxemburg, it was reported that the severity of the penalties would be increased 
in a new draft law. 
In Poland, a stakeholder reported that penalties should have a deterrent effect and 
therefore the penalties must be severe. The same stakeholder confirmed that this is 
the case in Poland. 
In  Portugal,  a  stakeholder  quoted  the  background  of  the  national  sanctions:  the 
range of sanctions has been proposed by a working group with representatives from 
the supervisory authorities, the Finance Ministry, the Justice Ministry and the FIU, 
with  the  aim  to  ensure  its  effectiveness,  taking  also  into  due  account  existing 
administrative sanctioning regimes. 
In  Slovakia,  a  stakeholder  reported  that  the  penalties  are  proportionate  and 
dissuasive as the range of sanctions provides for an adequate supervisory response 
to  the  existing  legal  infringements  and  cases  of  non-compliance.  In  each  case  the 
following  elements  are  considered:  the  severity,  if  the  breach  has  occurred 
repeatedly,  for  how  long  the  law  has  been  violated  and  all  other  relevant 
circumstances. 
In Slovenia, it was reported that during the fourth round of Moneyval evaluation it 
was noted that the level of fines in Slovenia is significantly higher than in many of 
the  surrounding  countries  (of  Slovenia's  immediate  neighbours  only  Italy  applies 
higher level of fines for legal persons). 
In the United Kingdom, a stakeholder is of the opinion that the range of sanctions 
available  is  appropriate  and  proportionate.  Sanctions  under  the  Regulations 
complement criminal sanctions for the principal money laundering offences in the 
Proceeds of Crime Act. 

168   A high level scan of recent FATF and Moneyval country reports and recent reports from FIUs was performed.  

169   Hungary (penalties imposed for an amount of 1 100 000 HUF in 2009), Slovakia (30 imposed penalties in 2009), Sweden (in 2008: 2 

banks were sanctioned with a fine of 50 million SEK for major non-compliance, source FATF report Sweden 2010, p. 14) Poland (16.000 
PLN in 2010), Romania (Non financial banking institutions – 200 000 RON; Companies – 50 000 RON, Real estate sector – 37 000 RON 
Auditors – 15.000 RON in the period 2009-2010). 

128 

 
 
 
 
 
                                                            
Covered  entities  who  gave  an  opinion  on  this  matter  (all  non-financial  professions)  clearly 
have  different  views.  Some  stakeholders  indicated  that  the  available  sanctions  are  not 
proportionate to the severity of the breach. Others have indicated the opposite. 

• 

• 

• 

• 
• 

In  Germany  and  in  Cyprus,  stakeholders  reported  that  due  to  the  wide  range  of 
administrative sanctions, a suitable penalty can be imposed in every case. 
In Ireland, a stakeholder reported that it considers the sanctions to be excessive in the 
relation professional - client; 
In Poland, a stakeholder reported that the sanctions are certainly dissuasive due to the 
disproportionate criminal sanctions; 
In Spain, a stakeholder reported that the sanctions are extremely severe; 
In  the  United  Kingdom,  different  stakeholders  commented  on  the  existing  criminal 
sanctions  expressing  the  opinion  that  the  criminal  sanctions  are  disproportionate. 
Some  respondents  question  the  fact  whether  the  regime  itself  has  led  to  more 
convictions of principal offenders.   

In  a  very  recent  report  from  HM  Treasury  (United  Kingdom)170  on  the  review  of  money 
laundering regulation, the following was stated regarding the effect of criminal sanctions: 

“Many believe that the threat of a criminal penalty under the Regulations discourages a risk 
based  approach  and  encourages  businesses  and  Money  Laundering  Reporting  Officers  to 
adopt a zero tolerance policy. However there some responses make the case for the continued 
provision of a criminal penalty, including the deterrence effect and the opportunities provided 
for supervisory and law enforcement activity.” 

170  Review of the Money Laundering Regulations: summary of the call for evidence (March 2010) – HM Treasury, p. 12 

129 

 
 
 
 
 
                                                            
 
ANNEX IX:  COMPARISON OF EU MEMBER STATES' RULES IMPLEMENTING AML RULES 

TO CASINOS AND THE GAMBLING SECTOR 

Obligations only upon casino operators 

Austria 

Belgium 

Czech Republic 

Germany 

Hungary 

Malta 

Romania  

The Netherlands 

United-Kingdom  

Obligations upon casino operators and 
other gambling operators 
Bulgaria  
(Casinos, bingo halls, lotteries, sport 
totalizators, etc.) 
Estonia 
 (“Organizers of games of chance”) 
Finland 
(“Any gaming operator and supplier of gaming 
activities”) 
Greece 
(“Casino  enterprises,  casinos  operating  on 
Greek  ships,  companies,  organizations  and 
other entities engaged in gambling activities as 
well as betting shops (agencies)”).  

France  
(Casinos, clubs, groups or companies in 
charge of games of chance, lotteries, betting, 
sport and horse race forecasts) 
Ireland  
(Casinos and private members’ clubs) 
Italy  
(Land based and online casinos, sport 
betting/forecasts and other gambling 
activities)(Casinos, online sport 
betting/forecasts) 

Latvia 
 (Lotteries and gambling) 
Lithuania  
(“Companies offering gaming”) 
Luxembourg  
(“Casinos and similar premises”) 
Portugal  
(Casinos, betting and lottery operators) 
Slovenia 
(Casinos, gaming halls, sport wagers, online 
games of chance) 
Spain  
(Casinos, lotteries and other games of chance) 
Sweden  
(Casinos, lotteries and other games of chance) 

Source: Altius 

130