EU negotiators reach agreement on Anti-Money Laundering directive

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As the end of last year drew to a close, negotiators for the European Parliament and EU state governments came to an agreement on the terms of a fourth EU Anti-Money Laundering directive. If adopted, the directive will mean that the EU’s 28 member states will have to maintain registers listing information on the ultimate beneficial owners of companies and other legal entities, as well as trusts.
Krišjanis Karinš, the Latvian MEP who led the negotiations showed his support for the directive; “for years, people in Europe have used the anonymity of offshore companies and accounts to obscure their financial dealings and creating registers of beneficial ownership will help to deter those who use offshore accounts to avoid paying tax and greatly aid the fight against money laundering and tax evasion.”

Transparency campaigners have responded with their doubts. In their view, one drawback is that the directive does not insist that such registers should be fully accessible to the public. Only those with a ‘legitimate interest’ in the information they contain will be allowed to access them; unless, individual member states decide to make their registers available to all.

The fact that this information is going to be collected and held in central national registers is really important. However, a lot depends on how each member state defines legitimate interest.

Bruno Cova, the Regional Representative for Europe on the IBA Anti-Corruption Committee, states that limiting access to the registers is likely to reduce their effectiveness; also leaving the assessment of the concept of ‘legitimate interest’ to the discretion of member states, could hamper the directives ability to effectively manage requests and therefore deny public access, Mr Cova says. Under the terms of the compromise, registers for trusts will only include those generating taxable income and only regulators will be able to access information about them.

The main concern seems to be that the wording does not clearly state the location of trust registries. Meaningful trust registries need to be located in the countries where the trust is governed, the declaration stresses. The proposal is the result of two years of intense negotiations within the European Council; in light of said agreement, it appears very likely that the measure will be adopted Mr Cova speculates.