- anti-money laundering law , EU Directive 2018/843 , 5th anti-money laundering Directive , subjected entities , prominent public functions
A new law has recently been published containing several additional provisions to prevent money laundering and terrorist financing and to restrict the use of cash.
The law of 20 July 2020 partially implements the EU Directive 2018/843 (5th anti-money laundering Directive) of 30 March 2018. It amends the anti-money laundering law of 18 September 2017.
What are the main changes?
1. Additional entities will be subject to the anti-money laundering legislation
These entities include:
- Providers engaged in exchange services of virtual and fiduciary currencies, and custodian wallet providers. More specifically, entities offering services to secure private cryptographic keys, to hold, store and transfer virtual currencies. These entities must register with the Belgian Financial Services and Markets Authority (FSMA) and are henceforth subject to its supervision.
- Art dealers, art galleries, auction houses and organisers of fairs and exhibitions, who buy, sell or act as intermediaries in the trade of art works or movable goods more than fifty years old (including antiques), when the sales price of one or more of these works or goods is equal to or more than EUR 10,000. They must be registered with the Federal Public Service responsible for Economy, SMEs, the Self-employed and Energy.
- Owners or operators of warehouses, including customs warehouses or warehouses located in free ports, who specifically offer a storage service for art works or movable goods more than fifty years old and only for such goods and works. They must also be registered with the Federal Public Service responsible for Economy, SMEs, the Self-employed and Energy.
- Professional top football clubs, brokers active in the football sector and the NPO (VZW/ASBL) Royal Belgian Football Association.
For other subjected entities, such as accountants and tax advisers, the law makes some adjustments.
2. The limit of prepaid payment instruments will be lowered
The storage limit for prepaid cards has been reduced from EUR 250 to EUR 150 per month.
Issuers of electronic money has to identify and verify the identity of each person in the case of redemption in cash, cash withdrawals of the monetary value of the electronic money, or online payments if the amount exceeds EUR 50 instead of EUR 100 previously.
3. A list of prominent public functions
All EU Member States, including Belgium, are obliged to draw up a list of prominent public positions. They must also ask the international organisations accredited on the Belgian territory to draw up a list of prominent public functions.
These lists must be sent to the European Commission, which will make them public.
The list of prominent public functions in Belgium is annexed to the law.
The law provides that subjected entities are required to implement appropriate risk management systems and procedures to determine whether a client with whom they enter into or have a business relationship or for which they carry out an occasional transaction, an agent of the client or a beneficial owner of the client is or has become a politically exposed person, a family member of a politically exposed person or a person known as a close associate of a politically exposed person.
Where they find that a client is in this situation, they must take measures of enhanced vigilance, in particular:
1° obtain permission from senior management to enter into or continue business relationships with such persons or to carry out an occasional transaction for such persons;
2° take appropriate measures to determine the origin of the assets and funds used in business relationships or transactions with such persons;
3° exercise enhanced supervision of the business relationship.
4. The law harmonises strengthened vigilance obligations
The law also provides for a list of measures of enhanced vigilance to be applied by subjected entities when entering into business relationships or occasional transactions with individuals or legal entities or with legal constructions, such as trusts or fiduciaries, relating to a high-risk country.
In that case, they should
- obtain additional information about the customer and the beneficial owner(s), the intended nature of the business relationship, the source of funds and the source of assets of the customer and the beneficial owner(s), the reasons for the transactions contemplated or carried out;
- obtain the approval of senior management to enter into or continue the business relationship;
- perform enhanced monitoring of the business relationship by increasing the number and frequency of audits and by selecting transaction patterns for further examination;
- ensure, where appropriate, that the first payment is made through an account opened in the customer's name with a credit institution subject to customer vigilance standards no less stringent than those laid down in this law.
5. Protection of personal data by the anti-money laundering law
As from 1 July 2020, the anti-money laundering law tightens up the rules on the processing of personal data.
The processing of personal data carried out under the anti-money laundering law by the subjected entities and by the supervisory authorities is subject to the provisions of the GDPR.
The processing of data under the anti-money laundering law is lawful because it is considered necessary for the performance of a task in the public interest and is justified and necessary under the legal obligations that the subjected entities and the supervisory authorities have to comply with under this law.
As you already know, the subjected entities and the supervisory authorities have an obligation to report to the Financial Intelligence Unit (CTIF-CFI) when they know, suspect or have reasonable grounds to suspect that funds and transactions (or attempted transactions) are related to money laundering or terrorist financing.
At the same time, however, they have a ban on communicating to the persons about whom they process personal data and have made a communication to the Financial Intelligence Unit (CTIF-CFI). This restricts the rights they normally have under the privacy law, such as the right to transparent information, the right of access, the right of rectification or erasure, and so on.
However, when processing their personal data, the subjected entities must inform their new clients of their legal obligations under the anti-money laundering law and the GDPR before entering into a business relationship or carrying out an occasional transaction with them.
6. The Constitutional Court confirms the professional secrecy of the lawyer
In this context, it is important to point out that the Constitutional Court partially annulled the Law of 18 September 2017 on the prevention of money laundering.
A lawyer (member of the bar) cannot be obliged to report a suspicious transaction to the Financial Intelligence Processing Unit (CTIF-CFI) when his client, on his advice, renounces to such transaction.
Neither can someone who is a third party to the relationship of trust between the lawyer and his client, even if he is a lawyer as well, be allowed to communicate to CTIF-CFI information covered by professional secrecy.
7. Cooperation between the competent authorities of the Member States shall be improved
The Directive provides for measures to facilitate and promote effective cooperation and coordination between the various national and international supervisory authorities. These measures are implemented in the new anti-money laundering law.
This law was passed in order to implement the EU Directive 2018/843, but far too late.
The law entered into force on 15 August 2020, except for the provisions relating to football and prepaid payment instruments.
The restrictions relating to prepaid payment instruments came already into force on 10 July 2020.
The regulation concerning professional football clubs and the VZW/ASBL Royal Belgian Football Association will enter into force on 1 July 2021. The King may postpone its entry into force by 6 months if a European Regulation, Directive or legal act requires an adaptation of the provisions concerned.
For brokers active in the football sector, a Royal Decree must set the date of entry into force after a cooperation agreement has been concluded with the regional authorities.
At the moment, implementing decrees that will have to provide further clarification on a number of aspects have to be published. For example, the registration obligation of providers of exchange services between virtual and fiduciary currencies, providers of custody portfolios, and art dealers.
We will keep you informed about this.