Banking and Financial Services

Overview

Last updated: 16 March 2018

Bird & Bird's EU Legislation Tracker highlights Regulations and Directives scheduled to take effect or to be implemented by Member States in the period prior to the UK's departure from the EU. It does not provide an exhaustive survey. Instead, we have sought to summarise some of the key legislation, both draft and finalised, which we are tracking in the run up to Brexit and which are likely to be of interest to companies which do business in the UK and/or elsewhere in Europe.

The Tracker includes a short commentary on the substance of each of the measures identified, and a timeline for their known or likely effective dates (for Regulations) or implementation deadlines (for Directives). These are colour coded by reference to the likely date of Brexit.

For the purposes of the Tracker, we have assumed that the UK will exit the EU two years from its service of the Article 50 notice (i.e. on 29th March 2019). However, a transitional period is expected to follow, until the end of 2020, during which the UK will be required to continue to align its laws with those of the EU Single Market and Customs Union. It is currently expected that the EU Withdrawal Bill will be enacted with effect from the exit date and that the resulting Act will retain all EU Regulations (and statutory instruments implementing EU Directives) in UK domestic law. However, the Act is also expected to enable amendments to such Regulations by statutory instruments during a two-years period, and this process will determine the final form, in UK domestic law, of such legislation now summarised in our Tracker.

Key
Implementation status 
  Implementation deadline/effective date likely to be pre-Brexit
  Implementation deadline/effective date likely to be post-Brexit
Timeline   EU legislation

Implementated
on: 

26 June 2017

 

Fourth Money Laundering Directive (MLD4) ((EU) 2015/849)

Overview:

  • The fourth piece of EU legislation on the prevention of the use of the EU financial system for money laundering and terrorist financing, which seeks to bring the EU regime in line with Financial Action Task Force standards.
  • MLD4 does not apply solely to financial services institutions, but extends to auditors, accountants, tax advisers, legal professionals, trust & company service providers, estate agents, gambling service providers, and traders of goods of EUR 10,000 or more.
  • Obliged entities are required to obtain and maintain information on their beneficial ownership, which is also to be made accessible on a central register (operated by Companies House in the case of companies, and HMRC in the case of trusts).
  • The approach to customer due diligence ("CDD") is to change, with a greater emphasis on a risk-based approach. The "white list" of non-EU jurisdictions deemed to have equivalent AML and CTF legislation is rescinded, meaning that obliged entities will have to perform risk assessment in respect of all non-EU jurisdictions in which they conduct business. The definition of "politically exposed persons"(in respect of whom enhanced CDD must be applied) is also extended.
  • An exemption to the requirement to perform CDD is introduced in respect of electronic money products with a maximum monthly limit of EUR 250.

Brexit impact:

  • MLD4 was implemented by the UK government on 26 June 2017 with the introduction of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the "MLTF Regulations").

Other information:

Full text of MLD4

Full text of the MLTF Regulations

Explanatory memorandum to MLTF Regulations

Revised Joint Money Laundering Steering Group guidance

Financial Conduct Authority ("FCA") finalised guidance on PEPs

FCA consultation paper on implementing MLD4

 

Implementation
deadline: TBC

 

Fifth Money Laundering Directive (MLD5) ((EU) 2016/208)

Overview:

  • The EU Commission has published a proposal for a Fifth Money Laundering Directive ("MLD5") to amend and expand upon MLD4.
  • Under MLD5, virtual currency exchange platforms and custodian wallet providers are to be brought within the scope of MLD4.
  • MLD5 clarifies the requirements for enhanced CDD by establishing a prescriptive set of measures to be applied by firms, including checks on the customer, the purpose and nature of the business relationship, the source of funds, and monitoring of transactions.
  • The threshold for application of the exemption from CDD in respect of electronic money products is to be reduced from EUR250 to EUR150.
  • The threshold that constitutes beneficial ownership of "passive non-financial entities" (i.e. intermediaries with no economic activity which create distance between beneficial ownership and the assets) is to be reduced, as they are deemed to pose a specific risk of money laundering and tax evasion.

Brexit impact:

  • A European Council notice of meeting explains that the European Council's working party on financial services met on 27 November 2017 to prepare for a ninth political trialogue on MLD5. However, it is not clear when the next trialogue meeting is taking place.
  • In an answer (dated 28 November 2017) to a written question on cryptocurrencies, the UK government advised that it expects negotiations on MLD5 to conclude in late 2017 or early 2018.Clearly, the longer it takes to reach agreement on MLD5, the less likely that the implementation date will fall before Brexit. It is uncertain what approach the UK will take to transposing MLD5 if the implementation date is post-Brexit.

Other information:

Full text of legislative proposal for MLD5

EBF position paper on MLD5

AFME/BBA position paper on MLD5

European Central Bank opinion on MLD5


                 
Bird & Bird's EU Legislation Tracker 
Aviation Data Protection & Cybersecurity HR and Employment Banking & Financial Services Intellectual Property Media Tax