Date: 03.06.2024

by Adam Dworak

EU Tightens Regulations on Cash Payments to Combat Money Laundering

The European Union (EU) has implemented stricter regulations governing cash payments, aiming to disrupt the channels through which illicit funds can be integrated into the legitimate financial system. This initiative seeks to safeguard the integrity of the EU’s financial landscape.

The Global Challenge of Money Laundering

Money laundering is a pervasive issue that allows criminal organizations and corrupt individuals to conceal the origins of their ill-gotten gains. By integrating these funds into the financial system, they can legitimize their activities and evade detection by authorities. The consequences of money laundering are far-reaching, undermining the stability of economies, fueling organized crime, and eroding public trust in financial institutions.

The EU has long recognized the need for a comprehensive and coordinated approach to tackling money laundering. Over the years, the Union has enacted a series of Anti-Money Laundering Directives (AMLDs), each iteration strengthening the regulatory framework and imposing more stringent obligations on financial institutions and other designated entities.

The Fifth Anti-Money Laundering Directive (AMLD5)

The latest iteration of the EU’s anti-money laundering efforts is the Fifth Anti-Money Laundering Directive (AMLD5), which came into effect in January 2020. This directive introduces a range of measures aimed at enhancing the EU’s ability to detect and prevent money laundering activities.

One of the key provisions of AMLD5 is the reduction of the cash payment threshold from €15,000 to €10,000. This means that any cash transactions exceeding €10,000 must be reported to the relevant authorities, providing greater visibility into potentially suspicious financial activities.

AMLD5 also expands the scope of entities required to report suspicious transactions, known as “obliged entities.” This now includes not only traditional financial institutions but also a broader range of businesses, such as real estate agents, art dealers, and cryptocurrency service providers.

Strengthened Customer Due Diligence

The directive also strengthens customer due diligence requirements. Obliged entities are now compelled to gather more comprehensive information about their clients, including the identification of beneficial owners. This measure aims to prevent the misuse of legal entities for money laundering purposes.

The expanded scope of obliged entities means that businesses across various sectors must adapt to these stringent regulations. Real estate agents, art dealers, and cryptocurrency service providers, among others, must now implement robust measures to identify and report suspicious activities. This broadening of scope ensures that all potential avenues for money laundering are closely monitored and regulated.