European Commission proposes new measures to fight against terrorist financing

European Commission will propose a number of targeted amendments to the Fourth Anti-Money Laundering Directive at the latest by the end of the second quarter of 2016, in the following areas:

• Ensuring a high level of safeguards for financial flows from high risk third countries: The Commission will amend the Directive to include a list of all compulsory checks (due diligence measures) that financial institutions should carry out on financial flows from countries having strategic deficiencies in their national anti-money laundering and terrorist financing regimes. Applying the same measures in all Member States will avoid having loopholes in Europe, where terrorists could run operations through countries with lower levels of protection;
• Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation: the scope of information accessible by the Financial Intelligence Units will be widened, in line with the latest international standards;
• Centralised national bank and payment account registers or central data retrieval systems in all Member States: the Directive will be amended to give Financial Intelligence Units easier and faster access to information on the holders of bank and payment accounts;
• Tackling terrorist financing risks linked to virtual currencies: to prevent their abuse for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms under the scope of the Anti-Money Laundering Directive, so that these platforms have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges;
• Tackling risks linked to anonymous pre-paid instruments (e.g. pre-paid cards): the Commission proposes to lower thresholds for identification and widening customer verification requirements. Due account will be taken of proportionality, in particular with regard to the use of these cards by financially vulnerable citizens.

Presenting the new plans to update EU rules to tackle emerging threats to national security, vice president Valdis Dombrovskis, says: „We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artefacts to virtual currencies and anonymous pre-paid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens.”

In particular, the Fourth Anti-Money Laundering Directive, introduced just last year, will be the subject of a number of amendments to be rushed through by the summer.

Under the new regime, bitcoin exchanges will have to comply with tougher money laundering regulations, applying customer due diligence checking and ending the anonymity associated with such exchanges.

The use of cash is also under scrutiny. Under a legislative proposal on illicit cash movements, the Commission intends to extend the scope of the existing regulation to include cash shipped by freight or post and to allow authorities to act upon lower amounts of cash where there are suspicions of illicit activity.