On June 19, 2024 the 6th AML Directive (Directive (EU) 2024/1640 of May 31, 2024), the AML Regulation (Regulation (UE) 2024/1624 of May 31, 2024) and the AMLA Regulation (Regulation (EU) 2024/1620 of May 31, 2024) (so-called “AML Package“) were published in the Official Journal of the European Union.
The main objectives of the AML Package include:
- reform the European Union’s AML/CFT regime;
- standardize AML/CFT obligations and measures in the EU;
- strengthen the supervisory system;
- extend due diligence and reporting requirements to new categories of obligated entities, including traders of luxury goods.
In this last respect, the new legislation introduces, for traders of luxury goods (including yachts, planes and supercars), customer identification and reporting obligations for certain types of transactions, thus imposing a necessary adaptation of business procedures to the new compliance obligations. These obligations, as we will see below, are triggered where the value of the goods sold exceeds certain thresholds.
This approach of the European legislator aimed at including transactions involving luxury goods in the AML regulation continues a line already traced, which is made more explicit in Recital 20 of the Regulation:
“Motor vehicles, watercraft and aircraft in the higher market segments are vulnerable to risks of misuse for money laundering and terrorist financing given their high value and transportability. Therefore, persons trading in such goods should be subject to AML/CFT requirements. The transportable nature of those goods is particularly attractive for the purposes of money laundering and terrorist financing given the ease with which such goods can be moved across or outside Union borders, and the fact that access to information on such goods where registered in third countries might not be easily accessible to competent authorities. To mitigate risks that Union high-value goods may be misused for criminal purposes and to ensure visibility on the ownership of such goods, it is necessary to require persons trading in high-value goods to report transactions concerning the sale of motor vehicles, watercraft and aircraft. Credit institutions and financial institutions provide services that are essential for the conclusion of the sale or transfer of ownership of such goods, and should also be required to report those transactions to the FIU. While goods intended solely for the pursuit of commercial activities should not be subject to such disclosure, sales for private, non-commercial use should not be limited to instances where the customer is a natural person, but should also relate to sales to legal entities and arrangements, in particular where they are set up to administer the wealth of their beneficial owner”
What exactly are these obligations?
When will they be in force?
What are the main changes introduced with particular reference to the luxury sector?
In this regard, a distinction should be made between the three regulatory sources in question.
THE VI ANTI-MONEY LAUNDERING DIRECTIVE
The VI Anti-Money Laundering Directive – which amends Directive (EU) 2019/1937 and repeals Directive (EU) 2015/849- refers to the mechanisms that member states must establish to prevent the use of the financial system for the purpose of money laundering or terrorist financing. It enters into force on the 20th day following its publication in the Official Journal of the European Union. As is well known, the Directive does not introduce direct and immediate obligations but requires an act of transposition by individual member states.
In this case, member states have a general deadline to transpose the Directive by July 10, 2027, except for:
(a) the rules regarding the registry on beneficial ownership (Articles 11-12-13-15), whose transposition deadline is July 10, 2026; and
(b) the Single Point of Access to Real Property Information (Art. 18) whose transposition deadline is July 10, 2029.
The main points of the 6th Directive that also affect the luxury sector are as follows:
(a) Register of beneficial owners
It will also be accessible to persons from the public with a legitimate interest, including the press and the civil society;
(b) Single access point of real estate records
real estate records should be accessible to the relevant authorities through a single access point, indicating information on price, type of ownership, historical data, and encumbrances such as mortgages, judicial restrictions, and property rights.
(c) Interconnection of current account records and criminal investigations
A centralized registry with current account information will be established to facilitate the tracking of financial flows and the detection of suspicious transactions in the investigative context.
(d) Powers of FIUs
FIUs will have immediate and direct access to, among other things, financial, administrative, investigative, tax information, on funds and other assets frozen as a result of targeted financial sanctions, on transfers of funds and transfers of crypto assets, on national registers of motor vehicles, aircraft and recreational craft, on customs data, and on national arms registers.
THE AML REGULATION
Subject matter and entry into force:
The Anti-Money Laundering Regulation (Regulation (EU) 2024/1624 of May 31, 2024) (or “Single Rulebook“) (Anti-Money Laundering Regulation) on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing enters into force on the 20th day following its publication in the Official Journal of the European Union.
It will apply as of July 10, 2027 except for those obligated under Article 3(3)(n) and (o) (football agents and professional football clubs), whose deadline will apply as of July 10, 2029.
Since this is a Regulation, the same will not require a national act of transposition and will therefore be immediately effective in the Member States on the above mentioned date.
The main changes introduced by the AML Regulation that affect the luxury sector are as follows:
a) Enhanced due diligence obligation in the case of high net worth clients: € 50 mln; violation of this obligation will constitute an aggravating penalty.
b) Union-wide limit set for cash payments (maximum € 10 000) except between individuals operating in a non-professional context.
c) Due diligence, transaction monitoring, and reporting requirements now extended to persons dealing in precious metals, precious stones, and other high-value goods defined as:
- Jewellery, gold- or silversmith articles of a value exceeding EUR 10 000 or the equivalent in national currency;
- Watches of a value exceeding EUR 10 000 or the equivalent in national currency;
- Motor vehicles of a price exceeding EUR 250 000 or the equivalent in national currency;
- Aircraft of a price exceeding EUR 7 500 000 or the equivalent in national currency;
- Watercraft of a price exceeding EUR 7 500 000 or the equivalent in national currency.
Specifically, with respect to KYC procedures, according to Article 25 of the Regulation, before entering into a business relationship or performing an occasional transaction, an obliged entity shall assure itself that it understands its purpose and intended nature. To that end, the obliged entity shall obtain, where necessary, information on:
a) the purpose and economic rationale of the occasional transaction or business relationship;
b) the estimated amount of the envisaged activities;
c) the source of funds;
d) the destination of funds;
e) the business activity or the occupation of the client.
For the purposes of the first paragraph, point (a), of Article 25, obliged entities covered by Article 74 (i.e. traders of luxury goods, see below), shall collect information in order to determine whether the intended use of high value goods referred to in Article 25 is for commercial or non-commercial purposes.
Article 74 of the Regulation specifies the reporting obligations over luxury traders. Specifically, there is a threshold-based reporting mechanism regarding transactions on certain high-value assets:
“Art, 74: Threshold-based reports of transactions in certain high-value goods:
- Persons trading in high-value goods shall report to the FIU all transactions involving the sale of the following high-value goods when those goods are acquired for non-commercial purposes:
a) motor vehicles for a price of at least EUR 250 000 or the equivalent in national currency;
b) watercraft for a price of at least EUR 7 500 000 or the equivalent in national currency;
c) aircraft for a price of at least EUR 7 500 000 or the equivalent in national currency.
- Credit institutions and financial institutions that provide services in relation to the purchase or transfer of ownership of the goods referred to in paragraph 1 shall also report to the FIU all transactions they carry out for their customers in relation to those goods.
- Reporting pursuant to paragraphs 1 and 2 shall be carried out within the deadlines imposed by the FIU.”
Further point of interest in the Regulations, for the purpose of defining PEPs (politically exposed persons) the following points are clarified:
- it includes heads of regional and local authorities, including groupings of municipalities and metropolitan regions, with at least 50,000 inhabitants;
- it includes other important public offices provided for by member states;
- “family members”: for offices under 34(a)(i) and equivalent offices at the Union level, or in a third country, brothers and sisters.
The AMLA REGULATION
Regulation (EU) 2024/1620 of May 31, 2024 establishing the Anti-Money Laundering and Anti-Terrorist Financing Authority (AMLA) and amending Regulations (EU) No. 1093/2010, (EU) No. 1094/2010, and (EU) No. 1095/2010, will enter into force on the seventh day following its publication in the Official Journal of the European Union, but will apply as of July 1, 2025. This regulation concerns the European Central Anti-Money Laundering Authority (AMLA), which will be based in Germany (Frankfurt).
Conclusions
In conclusion, traders in the luxury sector and in particular in the trade of high-value motor vehicles, boats and aircraft should as of now, in view of the July 10, 2027 entry into force of the Anti-Money Laundering Regulation, prepare a system of customer due diligence, appointing a Compliance Officer with possible externalization of the relevant activities (although the relevant liability shall remain with the obliged entity), to ensure compliance with anti-money laundering regulations, and adopt KYC protocols that ensure the collection and storage of information and documentation required by the regulations and the making of threshold reports. It should also be pointed out that the current system provides for checks and inspections by the relevant authorities (the Guardia di Finanza in Italy) and high penalties for violations of compliance, borne by all those are obliged to.
PG Legal provides AML/CFT & Compliance consultancy services to all Luxury players, including Shipyards, Brokers, Dealers, Professionals, Financial Institutions. For any information you may contact Avv. Gianfranco Puopolo (g.puopolo@pglegal.it) and/or Avv. Lucilla Margherita (margherita@pglegal.it)