The Fourth EU Money Laundering Directive - Effect outside the EU

The European Union has at last passed its 4th Money Laundering Directive.

It has huge implications for financial services businesses outside the EU with EU operations, and for EU regulated businesses with non-EU operations.



The 4th Money Laundering Directive (D IV) is not a small revision : it is a fundamental re-assessment of the first three Directives which has become somewhat messy.

But the fact that it's a complete review does not mean that the EU has made it clear and simple to comply with.

Directives are laws agreed by EU countries at a federal level. However, they are not federally implemented or enforced. Each state must adopt the Directive and pass it into national law. In theory, all countries should adopt the Directive in full - but there are get out clauses that allow countries to modify the Directive before implementation. There is a fixed timetable for implementation - but history shows that some countries act promptly and others are very slow. And these variations are only a part of the concern: enforcement is both inconsistent and patchy.

Therefore, what appears, on the face of it, to be a standardised law applicable across Europe turns out to be a patchwork full of holes.

D IV continues with the general direction of D I - D III and it imports much of the Financial Action Task Force's Recommendations - but not the latest versions. It also takes cues from the USA.

D IV is addressed to countries, not citizens or residents. It has no power other than through national governments.

However, once imposed, it creates a network of laws and regulations that is highly complex.

It is, for example, applicable not only to the financial sector but everyone in the EU. It has a downstream effect so that subsidiaries and even agents of EU businesses are affected (in some cases directly and in some cases indirectly) by it.

Therefore all financial institutions which are subsidiaries, branches or representative offices of EU headquartered companies are affected.

So are financial institutions which themselves have subsidiaries, branches or representative offices in the EU.

More, those whose customers trade in the EU are at increased risk.



© 2015 Nigel Morris-Cotterill
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