EMA: proposed amendments for the 4th Anti-money Laundering Directive and Wire Transfer Regulation

As a part of the ongoing discussions on the fourth Anti-Money Laundering Directive and the Wire Transfer Regulation we have today published our amendments for the 4th Anti-money Laundering Directive. In particular we suggest to keep the current Simplified Due Diligence (SDD) regime of the third Anti-Money Laundering Directive in place, rather than eliminating it. This regime includes a threshold that allows due diligence to be postponed until the customer has used the product to an extent that justifies undertaking due diligence both from the perspective of risk and the cost of undertaking CDD.

We note that, without thresholds, the cost of undertaking CDD at the outset is prohibitive given the narrow profit margins and occasional use of e-money products. As an alternative model, we could also envisage that the EUR 2,500 turnover limit for reloadable devices would be reduced to EUR 2,000, and that a prohibition is introduced on redemption in cash or onto a non-verified payment instrument for both reloadable and non-reloadable devices operating under the SDD provisions.

Our detailed suggestions seek to ensure that the typical one-off nature of the e-money product is catered for. Due to the singular use of the product, there is not always a business relationship and our proposed amendments reflect this. We also suggested some changes to ensure that the market remains as harmonised as possible. The new directive should not lead to a situation in which, apart from the home-state legislator, each Member State may add-on its own additional AML-requirements.

In our view, attention should also be paid to the upcoming revision of the Payment Services Directive and Electronic Money Directive. These directives aim to allow for innovation and the presence of all kinds of innovative players in the market place, while ensuring that prudential requirements are being met. Meanwhile, the market will see the further development of all kinds and types of cash-like, low value payment transactions, made on a wide range of devices, that may fall under the scope of these revised Directives. This increases the importance of maintaining a simplified due diligence regime that does not prohibit these transactions at the outset.