The European Union's proposal for a fourth directive to govern money laundering controls is unlike any of its predecessors and promises to be nothing like the directive which, according to its text, will supersede it in a few years.

Record-keeping reform

There are some record-keeping suggestions in Article 39 that are unlikely to be new to most countries. The EU wants the new law to compel financial firms to spend five years storing the “know your customer” data they collect to prove that each new applicant for business is who he/she/it claims to be. It wants the same for documents that prove the veracity of the business relationships that underpin customers' wealth. The idea is to keep the information ready for official scrutiny at any time; this is already happening in most of the old (pre-2004) member-states, and should already be happening in the rest according to national laws. Five years has long been the almost-universal compliance record-keeping period throughout the civilised world.

What the people who claim to represent the bankers think

The European Banking Federation is a typical EU construct which purports to represent the interests of all EU states' banking sectors. It has had privileged access to the inner workings of the EU legislative process on this subject. Its response to the proposal is full of objections. To begin with, it fears the costs associated with the identification of beneficial owners – an expensive undertaking if applied to a private bank's entire business. It also decries the fact that the proposal stops short of calling for EU-wide standards for publicly registered information regarding shareholdings and beneficial ownership in general as regards unlisted companies.

Its concern here is ostensibly “legal certainty,” although cost must surely be a larger worry. If such registers did exist, ordinary taxpayers would be footing the bill and not banks. There is, however, an EU plan to promote a “European business register” which merely copies information from national registers such as the one at Companies House in London, but the EU's planners did not deign to link this up to the money-laundering proposal.

On the same theme, the EBF thinks that national governments should provide its members with ready-made lists of PEPs. The EU's legislators, however, are famously shy of agreeing to expenditures of governmental effort and money on this scale.

The EBF is on firmer ground in asking for a clear definition of such terms as “international organisation.” Article 19 calls on compliance officers and money-laundering reporting officers to treat “persons who are or who have been entrusted with a prominent function by an international organisation” as PEPs who require EDD. However, neither the proposal nor its lengthy preamble define the term “international organisation”. The EBF also wants watertight definitions for “supervisory bodies” and “state-owned enterprises”.