New era of European Union anti Money Laundering Regulations in Banking Practice
In 2014 the Eur. Commission released its proposal for the 4th MLD giving countries years to roll up the changes. It is important for banks and corporates to be prepared to meet the following major changes:
- Beneficial Ownership
- Politically Exposed Persons (PEP)
- Customer Due Diligence
- Inclusion of Tax Crimes
- Due Diligence Outsourcing
- Information Requirements for Fund Transfers
The recent terrorist attacks on Europe’s people and values were coordinated across borders, showing that we must work together to resist these threats.
European Commission President Jean -Claude Junker
2 February 2016 in Strasbourg, the Commission presented the “Action Plan” to strengthen fight against terrorist financing.
Main goal to prevent the EU financial system from being used for money laundering and terrorist financing purposes.
Two main objectives:
- Prevent the Movement of Funds and Identify Terrorist Funding concentrating on the following areas:
- Ensuring a high level of safeguards for financial flows from high risk third countries:
- Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation:
- Centralised national bank and payment registers/ central data retrieval systems in all Member States
- Tackling terrorist financing risks linked to virtual currencies:
- Tackling risks linked to anonymous pre-paid instruments (e.g. pre-paid cards):
- Improving the efficiency of the EU’s transposition of UN asset freezing measures
- Criminalising money laundering:
- Limiting risks linked to cash payments:
- Assessing additional measures to track terrorism financing:
- Disrupt Sources of Revenue for Terrorist Organisations
Illicit trade from occupied areas is currently a primary source of revenue for terrorist organisations.
The Commission and the European External Action Service will provide technical assistance to Middle East and North African countries to fight against the trafficking of goods and provide support to third countries to comply with United Nations Security Council Resolutions in this field.
Compliance with EBA regulatory products- EBA Guidelines and Recommendations
The European Banking Authority (EBA) issues regulatory guidelines and recommendations in its fields.
Regulation (EU) No 1093/2010 establishing the EBA requires that competent authorities and financial institutions make every effort to comply with the EBA guidelines and recommendations (Article 16).
Guidelines and recommendations after officially announced, competent authorities across the EU must inform the EBA whether they comply or intend to comply and financial institutions might also have to report whether or not they comply.
Non EU supervising bodies
US Financial Crime Enforcement Network
Banking and Legal Considerations on documentation relating to INITIAL PUBLIC OFFERS and Alternatives
Initial Public Offerings (IPOs)- Rationale
- Companies may float to raise cash for expansion;
- to give them access to capital in the future,
- to gain status and credibility,
- to create currency for further shares,
- to create acquisitions
IPO Alternatives
- Introduction– no shares are issued or sold, when existing shares are traded on the market.
- Retail offering– offer of shares to retail shareholders.
- Institutional offering-offer of shares to institutional investors such as investment firms and funds.
Propectus for Equity Issues
- A Prospectus is a document prepared to provide potential investors with full information about a company proposing to issue new securities, or to list on an equity market.
- full information on the offering price
- full information on the business of the company,
- audited financial statements.
Contents of the Prospectus
- Within the European Union the contents of a prospectus are prescribed by the EU Prospectus Directive.
its three elements are:
- Summary – must convey concisely, the key information relevant to the securities which are the subject of the prospectus, and help investors to consider to invest in the securities.
- Registration document – containing information about the business, management history and financial information.
- Securities note – containing information about the securities to be issued, price and subscription procedure.
Necessary Documentation in a Private Corporate Transaction
Corporate Finance Documentation
Information Memorandum (IM)
- The Information Memorandum (IM) is a description of the business that is for sale, aiming to provide sufficient information to potential investors including amongst others:
- potential risks
- material legal issues
- last 2-3 years financial statements
- Confidentiality Letter: outlines the fact that the vendor is providing non-public information to potential investors or purchasers, who undertake the obligation to keep it confidential.
- Engagement Letter: the letter used to engage an adviser for a particular assignment establishing the adviser’s duties and the company’s responsibilities.
Representations, Warranties and Indemnities:
During the sales process the vendor represents (confirms) that certain information is true and/or complete, and
further provides a warranty (a promise or assurance) that this is so, for a number of subjects, such as property, tax, accounting and others,
additionally, provides indemnities for certain specific matters where there is uncertainly, such as the current year’s tax liability , or ongoing litigation.
Sale and Purchase Agreement
- The Sale and Purchase Agreement is a legal contract creating an obligation for the seller to sell and the buyer to buy the business including amongst others:
- A description of entities and assets to be sold, and the amount.
- The completion date and terms and conditions of sale and completion.
- Representations, warranties and indemnities.
Due Diligence requirements on a private company acquisition
The 21 Golden Rule
Freshly issued original and apostiled Company Incorporation Certificates
- The Company’s Memorandum and Articles of Association
- Incorporation Certificate.
- Updated Certificate of Good standing issued by the Registrar of Companies.
- Updated Certificate of Incumbency issued by the Company Secretary/ Director, with specific mention to any pending legal actions involving the company.
- Certificates of: a. Shareholders b. Directors and Secretary c. Registered office of the Company.
- Company Resolutions of any share capital increase or reduction.
- Any share Purchase Agreements and proof of filed changes with the Registrar of Companies.
- Register of Members showing all past and current shareholders and share capital history.
- Register of Directors showing history of all past and current directors.
- Copies of all necessary Resolutions, Resignations or Appointment letters of company officers
- Details of any options, warrants or conversion rights for the purchase or subscription rights of any shares .
- Documentation proving direct Beneficial Ownership of shares by individuals, and in the event of use of nominees, the necessary Certified Trust Documentation.
- Evidence of any pledges, or other encumbrance over any of the shares in the Company.
- Evidence of any charges or other encumbrance over any of the assets of the Company.
- Evidence that share capital of the Company is fully paid, and detailed description and valuation of the assets used for this purpose.
- Minutes of Shareholders and Directors meetings from the date of the Company incorporation.
- Any Powers of Attorney or other expressed or implied authority given by the Company to any third person which is still valid together with any relevant company resolutions.
- Copies of all licenses, consents, permits, and registrations held now or were held by the Company.
- Details and copies of all filings made by the Company with the Registrar of Companies, Income Tax Office, VAT Office and any other government organisation.
- Proof of settlement of all taxes, and information as to any pending tax liabilities.
- Provision of company annual audited accounts and auditors reports.
