The Fourth Anti-Money Laundering Directive (AMLD 4) aims to strengthen the integrity of the EU’s financial system by combating money laundering and the financing of terrorism. AMLD 4 relies on the principle that illicit financial flows can damage not just the Member State concerned, but the stability and reputation of the entire EU financial sector.
The evolution of financial crime
Financial crime has become more sophisticated over time, often involving international networks. This has made tighter controls and increased coordination across jurisdictions more important than ever. The EU’s approach aligns closely with international standards, including those set by the Financial Action Task Force (FATF).
Key Objectives of AMLD 4
One of the core goals of AMLD 4 is to improve transparency by ensuring that the beneficial ownership of companies is identified and recorded. This means tracing the ownership structure to the individual who ultimately owns or controls the entity. The Directive mandates that this information must be accurate, up-to-date, and easily accessible to competent authorities
Key Aims of Anti-Money Laundering Legislation
Identifying the beneficial owner is key to avoiding would-be criminals from hiding behind a corporate structure. This is the raison-d’etre behind the due diligence and other obligations underlying the Directive.
The aim is to look for the individual (natural) person at the very end of the line. Information needs not only be adequate and accurate, but also up-to-date, which is why certain checks need to be repeated regularly.
Main changes in AMLD 4
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Less Reliance on Simplified Due Diligence: Simplified Customer Due Diligence (CDD) is now only allowed in limited cases. Entities must demonstrate low risk before applying reduced checks—and must continue to monitor the relationship.
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Enhanced Due Diligence (EDD): Required for high-risk clients, such as asset-holding vehicles, cash-intensive businesses, and transactions involving high-risk jurisdictions.
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Wider Scope of Politically Exposed Persons (PEPs): The definition now includes individuals in domestic public positions, not just foreign ones. All PEPs are automatically subject to EDD.
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Central Beneficial Ownership Registers: Companies must maintain beneficial ownership information in a register accessible to national authorities like the MFSA and FIAU in Malta.
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Lower Transaction Thresholds: The threshold for triggering CDD for cash transactions has been reduced from €15,000 to €10,000. For high-risk gambling operations, the threshold is as low as €2,000.
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Gambling Sector Inclusion: The entire gambling sector now falls under AMLD 4, not just specific areas, and subject persons must apply CDD when applicable.
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Tax Crimes as Predicate Offences: Tax offences are now clearly predicate offences across all EU jurisdictions. This harmonises definitions and enables Member States to better enforce the AMLD 4 rules.
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Increased National Oversight: Member States must perform their own national risk assessments. This could may lead to Member States introducing stricter national requirements.
Malta’s Implementation
On 20 December 2017, Malta adopted the Prevention of Money Laundering and Funding of Terrorism Regulations, 2017, in line with AMLD 4. These regulations repealed the 2008 rules and introduced risk-based CDD as the standard approach.
Although the FIAU is revising the Implementing Procedures (Part I), entities are advised that in case of conflict between this document and the regulations, the 2017 regulations will take precedence.
Final Thoughts
AMLD 4 marks a significant shift in the EU’s AML framework. By focusing on transparency, harmonisation, and a risk-based approach, AMLD 4 aims to make financial systems more resilient to abuse. Malta’s regulatory framework continues to evolve to meet these standards, reinforcing its commitment to compliance and integrity in financial services.