Practice Areas: Finance

Type: Articles

Prevention of the use of the financial system for money laundering

On the 31st August 2020 law number 58/2020 was published in the official gazette, that transposes European Directive 2018/843 of the European Parliament and the European Council of 30th May 2018 (AML V), that alters the European Directive 2015/849 relative to the prevention of the use of the financial system for money laundering purposes or the financing of terrorism (AML IV) and European Directive 2018/1673 of the European Parliament and the European Council of 23rd October 2018 relative to combating money laundering via criminal law.

The new law came into force on 1st September and changed legislation of major relevance for financial activity in Portugal, in particular law number 83/ 2017 of 18th August that establishes measures for combatting money laundering and financing of terrorism and which had transposed AML IV into Portuguese legislation; The legal regime of the central registry of the actual beneficiary (approved by law 89/2017 of the 21st August) and the General Regime of Credit Institutions and Financial Companies (“RGIC”, approved by Decree Law 298/82 of the 31st December).

Portugal transposes in this way AML V (which must be transposed by all member states by 10th January 2020), which was approved in order to respond to, namely, the emerging new techniques in the context of financing of terrorism, ensuring transparency in the structure of European companies, as well as in other entities such as trust funds, and broadens the remit of existing rules to include providers of exchange rate services for virtual and fiat currencies and custodians of digital portfolios.

Among the changes introduced by the new law we highlight:

  • Inclusion of a new concept of virtual assets, defined as any digital representation of value (Bitcoin and other digital currencies) that isn’t necessarily linked to a legally established currency and which doesn’t have the legal stature of a fiat currency, but which is accepted as a means of exchange or investment that can be traded via electronic means.

    The Bank of Portugal has become the entity responsible for the registration of these entities and the verification of the fulfilment of the legal provisions and applicable regulation in terms of prevention of money laundering and financing of terrorism by the same entities – not being, however, responsible for the prudential supervision or supervision of conduct of these entities (as stated by the communiqué of the regulator available at: https://www.bportugal.pt/comunicado/banco-de-portugal-passa-supervisionar-ativos-virtuais-na-prevencao-de-branqueamento-de).

  • Broadening of the concept of the actual beneficiary, namely in the context of entities of collective investment and trusts and alteration of the regime applicable to the registration of the actual beneficiary in the RCBE, including in the remit of the obligation to update this, as well as rights to access to this, with relation to the rules applicable to the protection of data;

  • Promotion of a more agile cross-border cooperation between the competent authorities and revision of the applicable administrative and criminal sanctions including via the introduction of the category of particularly serious misdemeanours and broadening of the type of criminal covered by the Penal Code via the express inclusion of new typical underlying illegal activities, expressly covering technological embezzlement and deception, terrorism and criminal association, environmental damage, among others, and broadening the concept of the advantages obtained via these same illicit activities.