ISOLAS LLP Partner, Adrian Pilcher, who specialises in trusts and financial services law, and Associate, Michael Adamberry, who specialises in Banking & Regulatory Services, AML and Data Protection, assisted Her Majesty’s Government of Gibraltar on different aspects of Gibraltar’s implementation of new EU money laundering regulations .
Commenting on the new regulations, Adrian Pilcher said:
“We expect that the banking, trust and fiduciary services sectors will see the greatest impact from the reforms, given that Gibraltar was already ahead of the curve with respect to the regulation of industry in the distributed ledger technology space. We will continue to work with industry and our clients to ensure that the new legislation achieves the outcome of full transposition, whilst remaining workable and clear”.
The Proceeds of Crime Act (Amendment) Regulations 2020 (“5AMLD Regs”), published on the (13.03.2020), has transposed, in part, the Fifth Anti-Money Laundering Directive (“5AMLD”) into Gibraltar law.
5AMLD makes amendments to the Fourth Anti-Money Laundering Directive (“4AMLD”). Our briefing does not aim to cover all of the changes brought in by 5AMLD, but to summarise some of the key changes which have been transposed into Gibraltar law by the 5AMLD Regs, as follows:
- Provision is made for the future establishment of a data retrieval system that shall enable the identification of persons that control or hold payment accounts, bank accounts and safe-deposit boxes in Gibraltar. The proposed “central automated mechanism” will allow immediate and unfiltered access to the data by the GFIU, as well as access by other law enforcement authorities and the GFSC by request to the GFIU. Only persons who have received appropriate training and been certified as “appropriate officers” within each entity shall be able to sign off on the information request, and requests to the GFIU (as well as access by the GFIU) may only be made on limited grounds related to AML, CFT or, in the case of the GFSC, in exercise of its supervisory functions.
- A new focus is placed on enhanced due diligence measures relating to dealings with high-risk third country entities, with particular emphasis on transactions that can be considered complex, unusually large, conducted in an unusual pattern or without an apparent economic or lawful purpose.
- Provision is made for an increase in transparency of reporting and inter-agency / inter-authority cooperation across Member States, removing the bars on information disclosure on the basis of differences in categorisation of predicate offence.
- 5AMLD also ensures that persons working for competent authorities, or auditors or experts acting on behalf of competent authorities, are bound by the obligation of professional secrecy. This is subject to an overriding obligation on competent authorities, as well as the persons they regulate, to report actual or potential breaches of AML/CFT laws, and in particular reporting suspicions of money laundering or terrorist financing internally and/or to FIUs. 5AMLD also ensures that suitable protection is afforded to persons that make such reports, and that they are legally protected from being exposed to threats, retaliatory or hostile action, or adverse or discriminatory employment sanctions.
- Provision is made for increased reporting to the European Commission by Member States.
- Account is now taken of technological innovation in the areas of electronic identification means, as well as data protection issues stemming from GDPR.
- The scope of the entities subjected to AML regulatory requirements has been widened to include persons trading in works of art and estate agents carrying out letting agency work. The scope of advisory work relating to tax matters falling within the scope of regulatory requirements has also been widened with the incorporation of a broad definition of “tax advisor”.
- It should be noted that, although 5AMLD brings providers engaged in exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers into the AML regulatory regime, Gibraltar has not transposed the 5AMLD wording as, in effect, it already regulates these activities. As early as 2017, Gibraltar had incorporated the necessary legislative amendments to regulate providers of distributed ledger technology (“DLT”) services. Under Gibraltar law anyone using DLT to store or transmit value belonging to another is already within scope of the 4AMLD regulatory regime. HM Government’s advisers have confirmed that this activity captures the new 5AMLD activities of engaging in exchange services between virtual currencies and fiat currencies, and providing custodian wallets. As a result, it was felt unnecessary to further transpose these aspects of 5AMLD.
- Transparency on beneficial ownership of corporate entities has been significantly increased, with the register of beneficial ownership having been made public. Again, many of the requirements introduced by 5AMLD had been previously transposed into Gibraltar law, such as an obligation to report discrepancies in registers (and a corresponding sanctioning regime), with the aim of ensuring that information held on the central registers is adequate, accurate and current. As a result, no further transposition has been required in relation to these changes.
- 5AMLD also sees the introduction of an obligation to establish a regime for the registration and disclosure of beneficial ownership information on trusts. It is anticipated that transposition of these requirements will follow later in the year after a technical consultation with the trust service industry. This staged implementation reflects the approach of UK, who published their technical consultation on the proposed registration of trusts regime on 24 January 2020 (via HMRC and HM Treasury).
- 5AMLD provides for the interconnection of the above registers across the EU by 10 March 2021. This is an obligation for the European Commission, who is responsible under 5AMLD to achieve the interconnection, as well to issue reports to the European Parliament by 26 June 2020 and by 31 December 2020; we shall continue to watch this space in this regard.
The ISOLAS team were directly involved in the drafting of the 5AMLD Regs and called upon for their expertise in the technical aspects of the legislation, which has required consequential amendments to the following pieces of national legislation:
- National Coordinator for Anti-Money Laundering and Combatting Terrorist Financing Regulations 2016 (NCR)
- Proceeds of Crime Act 2015 (POCA)
- Register of Ultimate Beneficial Owners Regulations 2017 (RUBOR)
- Supervisory Bodies (Powers etc.) Regulations 2017 (SBPR)
- Terrorism Act 2018 (TA 2018)
The team also liaised with the Gibraltar Financial Services Commission with respect to the Legislative Reform Programme (LRP), that came into force on 15 January 2020, which considers, amongst other things, relevant articles from 5AMLD amending existing European Directives concerning Solvency II and CRD IV.
With uncertainties over Brexit still looming in the background, the implementation of 5AMLD comes at a good time for Gibraltar, having had our financial services offering bolstered through the LRP. This provided the necessary clarity that industry will undoubtedly welcome and reaffirming Gibraltar’s position as a financial centre of choice, with a comprehensive regulatory framework that includes robust AML/CFT legislation.
 DIRECTIVE (EU) 2018/843 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU
 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC