Commission Directive 2006/70/ECShow full title

Article 1 Subject-matter

This Directive lays down implementing measures for Directive 2005/60/EC as regards the following:

1.

the technical aspects of the definition of politically exposed persons set out in Article 3(8) of that Directive;

2.

technical criteria for assessing whether situations represent a low risk of money laundering or terrorist financing as referred to in Article 11(2) and (5) of that Directive;

3.

technical criteria for assessing whether, in accordance with Article 2(2) of Directive 2005/60/EC, it is justified not to apply that Directive to certain legal or natural persons carrying out a financial activity on an occasional or very limited basis.

Article 2 Politically exposed persons

1. For the purposes of Article 3(8) of Directive 2005/60/EC, ‘natural persons who are or have been entrusted with prominent public functions’ shall include the following:

(a) heads of State, heads of government, ministers and deputy or assistant ministers;

(b) members of parliaments;

(c) members of supreme courts, of constitutional courts or of other high-level judicial bodies whose decisions are not subject to further appeal, except in exceptional circumstances;

(d) members of courts of auditors or of the boards of central banks;

(e) ambassadors, chargés d'affaires and high-ranking officers in the armed forces;

(f) members of the administrative, management or supervisory bodies of State-owned enterprises.

None of the categories set out in points (a) to (f) of the first subparagraph shall be understood as covering middle ranking or more junior officials.

The categories set out in points (a) to (e) of the first subparagraph shall, where applicable, include positions at Community and international level.

2. For the purposes of Article 3(8) of Directive 2005/60/EC, ‘immediate family members’ shall include the following:

(a) the spouse;

(b) any partner considered by national law as equivalent to the spouse;

(c) the children and their spouses or partners;

(d) the parents.

3. For the purposes of Article 3(8) of Directive 2005/60/EC, ‘persons known to be close associates’ shall include the following:

(a) any natural person who is known to have joint beneficial ownership of legal entities or legal arrangements, or any other close business relations, with a person referred to in paragraph 1;

(b) any natural person who has sole beneficial ownership of a legal entity or legal arrangement which is known to have been set up for the benefit de facto of the person referred to in paragraph 1.

4. Without prejudice to the application, on a risk-sensitive basis, of enhanced customer due diligence measures, where a person has ceased to be entrusted with a prominent public function within the meaning of paragraph 1 of this Article for a period of at least one year, institutions and persons referred to in Article 2(1) of Directive 2005/60/EC shall not be obliged to consider such a person as politically exposed.

Article 3 Simplified customer due diligence

1. For the purposes of Article 11(2) of Directive 2005/60/EC, Member States may, subject to paragraph 4 of this Article, consider customers who are public authorities or public bodies and who fulfil all the following criteria as customers representing a low risk of money laundering or terrorist financing:

(a) the customer has been entrusted with public functions pursuant to the Treaty on European Union, the Treaties on the Communities or Community secondary legislation;

(b) the customer’s identity is publicly available, transparent and certain;

(c) the activities of the customer, as well as its accounting practices, are transparent;

(d) either the customer is accountable to a Community institution or to the authorities of a Member State, or appropriate check and balance procedures exist ensuring control of the customer’s activity.

2. For the purposes of Article 11(2) of Directive 2005/60/EC, Member States may, subject to paragraph 4 of this Article, consider customers who are legal entities which do not enjoy the status of public authority or public body but which fulfil all the following criteria as customers representing a low risk of money laundering or terrorist financing:

(a) the customer is an entity that undertakes financial activities outside the scope of Article 2 of Directive 2005/60/EC but to which national legislation has extended the obligations of that Directive pursuant to Article 4 thereof;

(b) the identity of the customer is publicly available, transparent and certain;

(c) the customer is subject to a mandatory licensing requirement under national law for the undertaking of financial activities and licensing may be refused if the competent authorities are not satisfied that the persons who effectively direct or will direct the business of such an entity, or its beneficial owner, are fit and proper persons;

(d) the customer is subject to supervision, within the meaning of Article 37(3) of Directive 2005/60/EC, by competent authorities as regards compliance with the national legislation transposing that Directive and, where applicable, additional obligations under national legislation;

(e) failure by the customer to comply with the obligations referred to in point (a) is subject to effective, proportionate and dissuasive sanctions including the possibility of appropriate administrative measures or the imposition of administrative sanctions.

Entity, as referred to in point (a) of the first subparagraph, shall include subsidiaries only in so far as the obligations of Directive 2005/60/EC have been extended to them on their own account.

For the purposes of point (c) of the first subparagraph, the activity conducted by the customer shall be supervised by competent authorities. Supervision is to be understood in this context as meaning the type of supervisory activity with the highest supervisory powers, including the possibility of conducting on-site inspections. Such inspections shall include the review of policies, procedures, books and records, and shall extend to sample testing.

3. For the purposes of Article 11(5) of Directive 2005/60/EC, Member States may, subject to paragraph 4 of this Article, allow the institutions and persons covered by that Directive to consider products which fulfil all the following criteria, or transactions related to such products, as representing a low risk of money laundering or terrorist financing:

(a) the product has a written contractual base;

(b) the related transactions are carried out through an account of the customer with a credit institution covered by Directive 2005/60/EC or a credit institution situated in a third country which imposes requirements equivalent to those laid down in that Directive;

(c) the product or related transactions are not anonymous and their nature is such that it allows for the timely application of Article 7(c) of Directive 2005/60/EC;

(d) the product is subject to a predetermined maximum threshold;

(e) the benefits of the product or related transactions cannot be realised for the benefit of third parties, except in the case of death, disablement, survival to a predetermined advanced age, or similar events;

(f) in the case of products or related transactions allowing for the investment of funds in financial assets or claims, including insurance or other kind of contingent claims:

(i)

the benefits of the product or related transactions are only realisable in the long term;

(ii)

the product or related transactions cannot be used as collateral;

(iii)

during the contractual relationship, no accelerated payments are made, no surrender clauses are used and no early termination takes place.

For the purposes of point (d) of the first subparagraph, the thresholds established in Article 11(5)(a) of Directive 2005/60/EC shall apply in the case of insurance policies or savings products of similar nature. Without prejudice to the third subparagraph, in the other cases the maximum threshold shall be EUR 15 000. Member States may derogate from that threshold in the case of products which are related to the financing of physical assets and where the legal and beneficial title of the assets is not transferred to the customer until termination of the contractual relationship, provided that the threshold established by the Member State for the transactions related to this type of product, whether the transaction is carried out in a single operation or in several operations which appear to be linked, does not exceed EUR 15 000 per year.

Member States may derogate from the criteria set out in points (e) and (f) of the first subparagraph in the case of products the characteristics of which are determined by their relevant domestic public authorities for purposes of general interest, which benefit from specific advantages from the State in the form of direct grants or tax rebates, and the use of which is subject to control by those authorities, provided that the benefits of the product are realisable only in the long term and that the threshold established for the purposes of point (d) of the first subparagraph is sufficiently low. Where appropriate, that threshold may be set as a maximum annual amount.

4. In assessing whether the customers or products and transactions referred to in paragraphs 1, 2 and 3 represent a low risk of money laundering or terrorist financing, Member States shall pay special attention to any activity of those customers or to any type of product or transaction which may be regarded as particularly likely, by its nature, to be used or abused for money laundering or terrorist financing purposes.

Member States shall not consider that customers or products and transactions referred to in paragraphs 1, 2 and 3 represent a low risk of money laundering or terrorist financing if there is information available to suggest that the risk of money laundering or terrorist financing may not be low.

Article 4 Financial activity on an occasional or very limited basis

1. For the purposes of Article 2(2) of Directive 2005/60/EC, Member States may, subject to paragraph 2 of this Article, consider legal or natural persons who engage in a financial activity which fulfils all the following criteria as not falling within the scope of Article 3(1) or (2) of that Directive:

(a) the financial activity is limited in absolute terms;

(b) the financial activity is limited on a transaction basis;

(c) the financial activity is not the main activity;

(d) the financial activity is ancillary and directly related to the main activity;

(e) with the exception of the activity referred to in point (3)(e) of Article 2(1) of Directive 2005/60/EC, the main activity is not an activity mentioned in Article 2(1) of that Directive;

(f) the financial activity is provided only to the customers of the main activity and is not generally offered to the public.

For the purposes of point (a) of the first subparagraph, the total turnover of the financial activity may not exceed a threshold which must be sufficiently low. That threshold shall be established at national level, depending on the type of financial activity.

For the purposes of point (b) of the first subparagraph, Member States shall apply a maximum threshold per customer and single transaction, whether the transaction is carried out in a single operation or in several operations which appear to be linked. That threshold shall be established at national level, depending on the type of financial activity. It shall be sufficiently low in order to ensure that the types of transactions in question are an impractical and inefficient method for laundering money or for terrorist financing, and shall not exceed EUR 1 000.

For the purposes of point (c) of the first subparagraph, Member States shall require that the turnover of the financial activity does not exceed 5 % of the total turnover of the legal or natural person concerned.

2. In assessing the risk of money laundering or terrorist financing occurring for the purposes of Article 2(2) of Directive 2005/60/EC, Member States shall pay special attention to any financial activity which is regarded as particularly likely, by its nature, to be used or abused for money laundering or terrorist financing purposes.

Member States shall not consider that the financial activities referred to in paragraph 1 represent a low risk of money laundering or terrorist financing if there is information available to suggest that the risk of money laundering or terrorist financing may not be low.

3. Any decision pursuant to Article 2(2) of Directive 2005/60/EC shall state the reasons on which it is based. Member States shall provide for the possibility of withdrawing that decision should circumstances change.

4. Member States shall establish risk-based monitoring activities or take any other adequate measures to ensure that the exemption granted by decisions pursuant to Article 2(2) of Directive 2005/60/EC is not abused by possible money launderers or financers of terrorism.

Article 5 Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 15 December 2007 at the latest. They shall forthwith communicate to the Commission the text of those provisions and a correlation table between those provisions and this Directive.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 6

This Directive shall enter into force on the 20th day following its publication in the Official Journal of the European Union.

Article 7

This Directive is addressed to the Member States.

Done at Brussels, 1 August 2006.

For the Commission

Charlie McCreevy

Member of the Commission