MLD V – important updates under the third presidency compromise text
News    ·   15-12-2016

AUTHOR: Diane Bugeja

The Council of the European Union released a presidency compromise text on the proposed MLD V dated 13 December 2016.

In connection with the access to the beneficial ownership register, the revised text refers to trusts and similar legal arrangements to note that rules that apply to trust and similar legal arrangements in respect to access to their beneficial ownership information should be comparable to the corresponding rules that currently apply to corporate and other legal entities. Importantly, the it is noted that Member States shall be required to define legitimate interest, both as a general concept and as a criterion for accessing beneficial ownership information of each and every category of corporate or other legal entity or trust or similar legal arrangement in their national law; this is a welcome revision in light of the subjectivity that surrounded access to such information on the basis of legitimate interest.

Interestingly, the requirement for obliged entities to apply enhanced due diligence measures to domestic PEPs which has been introduced by the MLDIV is being revisited in this compromise text. The third compromise text provides discretion to Member States to exempt the application of enhanced due diligence measures to domestic PEPs provided that there are no risk variables indicating an overall higher risk. This should be viewed favourably by a number of jurisdictions, including the UK, which considered other legislative measures to ensure that domestic PEPs would not have a hard time accessing financial services as a consequence of the more stringent controls that obliged entities must adopt in their respect. Since the discretion remains in the hands of Member States, this may still result in inconsistencies in the treatment of domestic PEPs between one Member State and another, depending on the risk appetite of the national competent authorities, and one would therefore need to wait for local transposition to assess the effect of this derogation.

The revised text further extends the transposition date of the MLDV, which, following updates issued under this compromise text, has been extended to 12 months after the publication of the MLDV in the Official Journal of the EU.


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