The (potential) new legislation has a particularly significant impact on football clubs, the ‘ultra-rich’ and luxury goods dealers. The new provisions also cover access to the Ultimate Beneficial Owner (UBO) register and the lowering of the UBO threshold in certain cases, cash limits, the crypto sector and the powers of local Financial Intelligence Units (FIUs). Thus, other entities that are indicated as institutions under the law for preventing money laundering and financing of terrorism (Wwft) will also be affected.
The preliminary agreement follows the agreement already reached in December 2023 to create a European Anti-Money Laundering Authority (AMLA). It is part of the reform of the EU’s anti-money laundering framework. The goal? A broad and harmonised EU front against money laundering. The main changes to the provisional agreement concern the seven issues below.
1. Football clubs will be designated as Wwft institutions
Football clubs will be designated as Wwft institutions from 2029 and will therefore be required, among other things, to verify the identity of customers, monitor transactions and report unusual transactions to the FIU. Member States may grant exemptions for 'less risky transactions' and to football clubs that play below the top division and have an annual turnover of less than EUR 5 million over a two-year period. What exactly 'less risky transactions' will be, is not yet clear. We assume that the include, for example, the sale of tickets to supporters, in which case the identification requirement would not apply. This would also be highly undesirable.
- Increased reporting requirements for luxury goods trade
Sellers of items such as cars over EUR 250,000 and yachts and private jets over EUR 7.5 million will have to report these transactions to the FIU from 2027 under the new provisions. As a result, the authorities will have a (better) insight into who the (ultimate) owner(s) in these transactions is/are. This also seems to have been prompted by the 'hunt' for Russian oligarchs after the introduction of various sanctions packages in the context of the war in Ukraine, who often turned out to be the owners of such luxury goods. It is possible that this will also affect, among other things, the reporting obligations of notaries and lawyers who may be involved in the transfer of these goods, although this is not clear at this stage.
In any case, it is certain that - if the provisional agreement is followed - the competent national authorities will have access to information on bank accounts, land or property registers, or certain high-value goods. Access to the information relating to the transfer of ownership of goods will be subject to the aforementioned threshold of EUR 250,000 for cars and EUR 7.5 million for yachts and aircraft.
- Accessibility of the UBO register
While the EU Court of Justice ruled in November 2022 that the UBO register should not be publicly accessible, the new anti-money laundering rules include provisions to make the register largely accessible again. In any case, the competent national authorities (presumably including the Public Prosecution Service, FIOD, DNB, AFM, etc.) and European supervisory authorities (including the newly established AMLA, the European Public Prosecutor's Office, the European Anti-Fraud Office (OLAF), Europol and Eurojust) should have access.
Wwft institutions will also have to be given 'temporary' (this is till date unspecified) access to the register when conducting their client due diligence. According to the new provisions, this will have to be paid for, which we find remarkable given the legal obligation to consult this register. Finally, it has been agreed that journalists, reporters and other media, non-governmental organisations and higher education institutions should have access to the registry as long as it is not misused. In this case, the EU Court of Justice will probably welcome the fact that the register is no longer public. On the other hand, a journalist does not have a protected title, so any self-appointed journalist could still gain access to the register. We therefore wonder whether there is/will actually be much difference to a publicly accessible register.
4. EUR 10,000 cash payment limit
A limit of EUR 10,000 for cash payments will apply throughout the European Union. Member States may set a lower limit at national level. The cash limit will be extended to payment service providers and electronic money providers, but it will not affect transactions between individuals who are not engaged in a professional activity.
5. 'Ultra-rich' high risk
Very wealthy or ‘high net-worth’ individuals (with assets of at least EUR 50,000,000 excluding their principal residence) will be considered high risk clients by Wwft institutions. This includes institutions that provide personalised wealth management services to these individuals, such as banks, investment firms and funds. The threshold for assets under management is EUR 5 million.
6. Lowering the UBO threshold in certain cases
According to an interview in Het Financieele Dagblad with European Parliament Member Paul Tang, the threshold for designating the UBO will be set at 15% of, for example, the shares or voting rights in cases where the risks of malpractice (in Dutch: malversaties) are assessed to be higher. This threshold is usually higher than 25%.
7. Screening obligation crypto sector
It also transpires from the abovementioned interview that a screening requirement for all transactions worth EUR 1000 or more will apply in the crypto sector. How this will work in practice is still unclear.
The preliminary agreed provisions must be formally approved by the Parliament and the Council before they can enter into force.
A significant strengthening of the fight against financial crime
The preliminary EU agreement marks a crucial step in strengthening anti-money laundering rules within the European Union, complemented by the earlier agreement to establish the European Anti-Money Laundering Authority (AMLA). The proposed changes, such as the classification of football clubs as Wwft institutions and increased reporting obligations for dealers in luxury goods, promise to have significant impact on various sectors. Expanding the powers of European FIUs, making the UBO register accessible, setting a cash limit and the adjustments to the UBO threshold and the crypto sector are evidence of a concerted effort to effectively tackle cross-border money laundering and terrorist financing. Although not yet officially adopted, these measures indicate a significant strengthening of the fight against financial crime within the EU.
Do you have any questions about these new standards and the consequences for (the implementation in) your (future) Wwft-institution? Do not hesitate to contact us.