EU Anti-Money Laundering Framework Alert: Requirements for customer due diligence to become more comprehensive

In the coming years, the current Dutch Anti-Money Laundering and Counter-Terrorist Financing Act (Wwft) will be replaced by new European anti-money laundering rules. This so-called AML framework consists of several pieces of regulation, including AMLR, AMLD6, and AMLAR.

In the run-up to the date on which the framework will become applicable, many additional rules and guidelines will be published. However, it is already known that the requirements for customer due diligence will change considerably. Whereas the Wwft currently has many open standards, these standards will be further defined and specified under the new regulations. Although the risk-based approach remains, as also emphasized by the Dutch Minister of Finance on May 14th, we see that stricter rules will apply to how these risks must be handled. As a result, there will likely be less flexibility in the type of information that needs to be requested.

It is therefore important to be prepared for this in a timely manner.

In this thematic article, we discuss the changes to customer due diligence as far as they are currently known and expected.

Identification and Verification Seemingly Unchanged, but Stricter Requirements Follow

The verification of identity must be carried out using documents, data, or information from a reliable and independent source. In the Wwft, this is an open standard. Under the new regulations, exact information requirements will be established, including the full name, place and country of birth, and all nationalities of the client. This impacts the method of verification and the documents that may be used for this purpose.

In the Wwft, customer due diligence includes identifying the UBO and taking reasonable measures to verify the UBO's identity. Under the new regulations, institutions will need to be convinced of who the UBO is. This means you must have determined who ultimately has control. This can be done through research and verification of ownership structures and other relevant information. Additionally, whereas under the Wwft a UBO is often determined by directly or indirectly holding more than 25% (of shares, voting rights, or ownership interest), the AMLR sets the threshold at 25% or more. It remains unchanged that the 25% rule is always intended as an indication: persons with a smaller interest can also be regarded as UBOs, for example, if they have ultimate control in another way.

Understanding the Ownership and Control Structure Becomes More Strictly Defined

Specific requirements will be established for obtaining information at each layer of the structure, such as legal form, registration, and country of incorporation. Additionally, a structure is considered complex if there are more than two layers of ownership. The new regulations also include the requirement to analyze the client's business operations and obtain information about them if necessary. In practice, this means that the behavior and activities of the client will be expected to be considered and documented, for example, through adverse media screening.

Determining the Purpose and Intended Nature of the Relationship Will Be Expanded

This means institutions must collect, analyze, and interpret information to understand the business relationship. Understanding goes a step further than simply determining and implies having deeper insight and the ability to clearly interpret the information obtained. This also means the client's activities must be taken into account, as well as the source and destination of the funds involved in the (proposed) business relationship. Additional technical standards will be established for this.

Screening Comes Explicitly into Scope

Specifically, sanctions screening of clients, UBOs, and all entities or persons who have ownership in the clients. In practice, this may have little impact, as the Sanctions Act 1977 already requires institutions to screen their clients against sanctions lists to prevent doing business with sanctioned persons or entities.

Documentation Becomes Even More Important

Under the new rules, it is still possible to distinguish between simplified and enhanced customer due diligence. Due to the additional rules that will apply, it becomes even more important to make a clear distinction in the CDD policy and client files regarding the requirements and conditions for simplified and enhanced due diligence.

How Can You Prepare?

Further clarification is needed for the interpretation of various provisions through technical standards (RTS). This makes it challenging for institutions to prepare in detail at this stage. However, there are already steps that can be taken. For example, conducting an assessment to become aware of and map out the impact. We can help you with this, among other things, through the Ruler Regulatory Change module. Ultimately, the new regulations will affect policies (including CDD and data management), procedures, systems and processes, and reporting.

Status and timelines of the AML framework

As of 10 July 2024, the AMLR and AMLD6 have entered into force. Both the AMLR and AMLD6 will be largely applicable from 1 July 2027. Additionally, the Regulation establishing the European AML/CFT Authority (AMLAR) has entered into force as of 25 June 2024 and will be largely applicable from 1 July 2025.

The AMLA (EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism) will also have a more active role. One of AMLA’s tasks will be to develop guidelines and technical regulatory standards that will provide more clarity on the application and implementation of AMLR and AMLD6.

A first draft technical standard (RTS) has recently been presented by the EBA for consultation. After the consultation period closes, the draft will be further developed and submitted to the Commission as advice. However, only the AMLA is authorized to propose an RTS to the Commission. 

In the coming period, we will continue to closely monitor the developments and keep you informed via our website and our monthly newsletter.  You can sign up for our newsletter here:

If you have any questions in the meantime, please don't hesitate to contact us.