What has changed?
On 5 August 2020, the Belgian Act of 20 July 2020 "laying down miscellaneous provisions on the prevention of money laundering and terrorist financing and on the limitation of the use of cash" was published in the Belgian State Gazette.
This new act implements the provisions of AMLD5 that were not yet implemented into Belgian law by thoroughly amending the AML Act. So far, only the provisions of AMLD5 in relation to the ultimate beneficial owner register (“UBO register”) were transposed into Belgian law.
With these new amendments, AMLD5 is now fully implemented in Belgium. The new rules will largely enter into force as of 15 August 2020, with a few exceptions such as the rules in relation to professional football clubs, which will enter into force as of 1 July 2021 (with a possible extension of 6 months).
What does it mean?
Extended scope of application of the anti-money laundering framework
AMLD5 extends the scope of application of the Belgian anti-money laundering framework significantly by including various new entities in the scope of the AML Act. The following entities are now also within its scope and must comply with various legal obligations and requirements on the prevention of the use of the financial system for money laundering or terrorist financing:
- Virtual currency exchanges and custodian wallet providers
Providers of services for exchanges between virtual currencies[1] and fiduciary currencies and custodian wallet providers[2], if established on Belgian territory, are now also subject to the AML Act. A future royal decree will require such entities to register with the Belgian Financial Services and Markets Authority (“FSMA”), who will also exercise supervision over them.
- Traders in works of art and warehouses providing storage services for works of art
This covers
(i) persons trading or acting as intermediaries in the trade of works of art and movable goods[3] of more than 50 years old, including when trading is carried out by art galleries and auction houses, if the value of the transaction or a series of linked transactions is EUR 10,000 or more and
(ii) persons that own or operate warehouses providing storage services for works of art.
This is to prevent terrorists from using antiques, art and cultural goods as a means of funding their terrorist activities. Trader in works of art and persons owning or operating warehouses to store works of art must register with the Federal Public Service Economy.
The rules and conditions for registering with the Federal Public Service Economy will be determined by a future royal decree. This registration must ensure that traders in works of art and persons owning or operating warehouses to store works of art have the necessary professional reliability for the performance of their activities.
As long as these rules and conditions have not been determined, traders in works of art and persons owning or operating warehouses to store works of art are not subject to the AML Act.
These are persons whose principal business or professional activity is, directly or through other persons related to them, to provide material aid, assistance or advice in the field of taxation.
This means that consultants or tax service providers who are not recognised by the Belgian Institute of Tax Advisers and Consultants are now also required to comply with the AML Act.
To a certain extent, these persons were already subject to the AML Act before, but they are now also required to comply with the AML Act when acting as intermediaries in the rental of real estate, but only in respect of transactions for which the monthly rent is EUR 10,000 or more.
- Professional football clubs
Undertakings established in Belgium that own or manage a professional top football club of which at least one team competes in the highest championship division of Belgium are now also subject to the AML Act.
The Federal Public Service Economy will register all such entities (i.e., currently the 25 clubs in Belgium’s 1A and 1B divisions) and is designated as their competent supervisory authority for anti-money laundering purposes.
It is also envisaged that the Royal Belgian Football Association would establish a "clearing house", which will keep an overview of all football transfers and the transactions made in respect thereof.
The Federal Public Service Economy will also adopt a regulation that specifies the concept of a “customer” in a football context and which identifies transactions that are to be considered as high and/or low risk. For example, player transfers and large sponsorship operations would be subject to anti-money laundering obligations. However, ticketing and catering activities would constitute a low risk of money laundering and would therefore not "a priori" fall within the scope of the anti-money laundering framework.
Professional football clubs will have time until 1 July 2021 to comply with Belgium’s anti-money laundering framework (with a possible extension of 6 months).
- Sports brokers in the football sector
All natural or legal persons established in Belgium that provide private employment brokerage services in the football sector to potentially paid sports practitioners or to employers with a view to concluding an employment contract for paid sports practitioners and whose activities are regulated by law are now also subject to the AML Act.
A future royal decree will require sports brokers to also register with the Belgian Federal Public Service Economy. The date of the entry into force of the new rules for sports brokers is still to be determined by a future royal decree.
- The Belgian non-profit organisation Koninklijke Belgische Voetbalbond
As of 1 July 2021, the Royal Belgian Football Association, which is the governing body of football in Belgium, will also be covered by the AML Act.
The exemption limit for non-reloadable payment instruments has been reduced from EUR 250 to EUR 150
Based on an appropriate assessment of the anti-money laundering risks involved, which demonstrates a low risk, electronic money issuers are currently not required to identify and verify the identity of their clients when issuing electronic money if certain risk-mitigating conditions are fulfilled. Among others, these conditions require that the payment instrument is not reloadable, or can only be used in Belgium for the execution of payments for which a maximum monthly limit of 250 EUR applies, and the maximum amount stored electronically remains below EUR 250.
These thresholds are now reduced from EUR 250 to EUR 150. Moreover, the exemption from customer identification and identity verification no longer applies in the event that the redemption or cash withdrawal of the monetary value of the electronic money exceeds EUR 50 or in the case of remote (online) payment transactions. Prior to AMLD5, the threshold was EUR 100.
List of exact functions that qualify as prominent public functions
A new requirement under AMLD5 is that, to identify politically exposed persons, EU Member States are required to draw up a list of the exact functions that qualify as prominent public functions. Member States should also require international organisations located in their jurisdiction to prepare and update such list. These lists must then be shared with the European Commission, which will make them publicly available.
For Belgium, the list consists of the prominent public functions as defined in Article 4, 28° of the AML Act. This list is further clarified in a separate annex to the AML Act (e.g., heads of State, ministers, members of parliament, board members of political parties, ambassadors, high-ranking officers, etc.).
Electronic identification of clients explicitly allowed
The identification and verification of the identity of clients is now also explicitly allowed by means of electronic identification means.
Reference is made in particular to the electronic identification and trust services within the meaning of the eIDAS Regulation[4].
The AML Act provides that this may also include national means of electronic identification approved by national authentication authorities.
UBO register
AMLD4 introduced new provisions regarding beneficial ownership and required Member States to keep a central UBO register of firms within their respective jurisdictions.
The most important changes under AMLD5 relate to the access to the UBO register and thus to the information of the natural persons concerned, the criteria to register trusts and similar constructions in the UBO register, the possibility that financial intelligence units and competent authorities can notify discrepancies in information to the UBO register and the introduction of retention periods for data in the UBO register.
As already mentioned, the provisions of AMLD5 in relation to the UBO register are already (largely) implemented in Belgium through a Royal Decree of 30 July 2018 "on the operating modalities of the UBO register". The legislator announced that only minor amendments would be made to this royal decree to ensure full compliance with AMLD5.
Harmonised enhanced due diligence requirements
AMLD5 introduces a harmonization of enhanced due diligence requirements when establishing business relations involving “high risk” third countries. Previously, each Member State determined at national level the type of enhanced due diligence measures that must be taken with regard to high-risk third countries. Those different approaches between Member States created weak spots in the management of business relationships involving high-risk third countries as identified by the European Commission.
Article 38 of the AML Act now provides for an accurate list of such enhanced due diligence measures. These measures include, among others, the requirement to obtain additional information on the customer, the ultimate beneficial owner, the intended nature of the business relationship, the source of funds, the requirement to obtain approval from senior management to establish the business relationship, ongoing monitoring requirements, etc.
Enhanced powers of financial intelligence units and facilitating their cooperation
Under AMLD5, the Financial Intelligence Units will have access to more information through centralised bank and payment account registers or data retrieval systems. The Financial Intelligence Units from the different EU Member States will also be able to cooperate more easily, as well as with other competent authorities.
The AML Act now reflects these amended rules to provide for a proper legal basis in this regard.
Enhanced cooperation between supervisory authorities
AMLD5 further enhances the exchange of information and cooperation between anti-money laundering supervisors and financial supervisory authorities including with the European Central Bank.
Various amendments are made to the Belgian legal framework to accommodate such cooperation and to remove any unintended obstacles in the cooperation between anti-money laundering supervisory authorities and financial supervisory authorities.
What is next?
The implementation of AMLD5 constitutes an important change to Belgium’s anti-money laundering framework, as it significantly expands the scope of application of the AML Act and introduces various new requirements that impact obliged entities.
Various new entities now fall within the scope of application of the AML Act and will have to comply with various customer due diligence and continued monitoring requirements. Certain new obliged entities, such as the virtual currency exchange providers and custodian wallet providers, must also register with the FSMA and are subject to the FSMA’s continued supervision (e.g., “fit and proper” requirements, etc.).
Interestingly, the Belgian legislator also decided to be at the forefront in Europe to subject professional football clubs and sports brokers in the football sector to Belgium’s anti-money laundering framework as a form of “gold-plating” AMLD5. The decision to include the football sector in the scope of the AML Act is the result of various recent football scandals in Belgium (and abroad). However, it remains to be seen how the Belgian legislator and Federal Public Service Economy will actually implement and apply the anti-money laundering framework to the football sector, as at least some form of a made-to-measure solution will be required.
Although AMLD5 is, in principle, now fully implemented in Belgium, various royal decrees and regulations are yet to be adopted to further clarify the extended scope of application and to further implement certain other new rules, such as in relation to the various registration requirements for virtual currency exchanges and custodian wallet providers.
If you want to read more, the text of the amendment act and its preparatory works can be consulted here. If you require further assistance in relation to the changes introduced by AMLD5, please consult your regular contact at Baker McKenzie.
[1] Virtual currencies are defined as “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically”.
[2] Custodian wallet provider means “an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies”.
[3] A work of art means any work of graphic or visual art, such as images, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramic works, glassware and photographs, provided that this work is a creation of the artist himself, or it is a copy that is regarded as an original work of art. With regard to movable goods of more than fifty years old, non-exhaustive reference is made to zoological, botanical, archaeological objects, parts of monuments which have not been preserved in their entirety, stamps, archives, musical instruments, etc.
[4] Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC.