European legislation is a response to the opportunities that the single market may create for criminals. It aims at protecting the EU financial system and other vulnerable professions and activities from being misused for money laundering and terrorist financing purposes.
The main legal instrument is currently Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (“Third AML Directive"). The Federal Ministry of Finance is responsible for implementing this Directive in the financial sector. For this purpose, several laws were amended (such as the Banking Act, and the Insurance Supervision Act).
The Third AML Directive adapts EU provisions to the 40+9 Recommendations of the Financial Action Task Force (FATF) as revised in 2003. In contrast to the Second AML Directive, the Third AML Directive and its Implementing Directive 2006/70/EC extend its scope by including measures to combat terrorist financing. Additionally, the Third AML Directive contains detailed rules for i.e. customer identification, politically exposed persons and correspondent banking.
Several directly applicable EU Regulations complement the measures established by the Third AML Directive:
- FATF’s Special Recommendation VII is implemented in the EU by Regulation (EC) No. 1781/2006 on information on the payer accompanying transfers of funds. This Regulation requires that all electronic transfers of funds (“wire transfers”) must be accompanied by a full set of information on the payer (name, address and account number/unique identification number). This ensures that all transfers of funds are completely traceable.
- Regulation (EC) No. 1889/2005 on controls of cash entering or leaving the Community implements FATF’s Special Recommendation IX. On the basis of this Regulation, any person entering or leaving the EU and carrying cash of a value of EUR 10,000 or more must declare that sum to the competent authorities (in Austria: the customs authorities). These provisions address the risk of increased cash movements for illicit purposes.