Preamble Recitals

Regulation (EU) 2024/1624 aims for harmonisation of the measures to be put in place to prevent money laundering, its predicate offences and terrorist financing at Union level. Distinguishing between business relationships and occasional transactions is central to the AML/CFT framework. This distinction is relevant for the obliged entity’s assessment whether to apply customer due diligence measures. For occasional transactions below the thresholds mentioned in Article 19 of Regulation (EU) 2024/1624, in general, no customer due diligence measures are required. Article 19(1), points (c), (d), (e) and (f) of Regulation (EU) 2024/1624 provide a list of four situations in which the application of customer due diligence measures is required regardless of the value of the transaction.

All obliged entities are required to have internal policies and procedures in place to ensure compliance with the obligations regarding customer due diligence in Chapter III of Regulation (EU) 2024/1624. These internal policies and procedures should be proportionate to the nature of the business – including its risks and complexity – and the size of the obliged entity. In the context of this Regulation, this includes internal policies and procedures to ensure that obliged entities can properly detect business relationships, occasional transactions and linked transactions for the purpose of application of customer due diligence measures. Such internal policies and procedures could include the identification and verification of the customer.

Identifying linked transactions is, among other, relevant for ensuring that the thresholds for occasional transactions are applied effectively to avoid circumvention of customer due diligence requirements and for identifying the obliged entities in Article 3(3), points (i) and (j) of Regulation (EU) 2024/1624. Although there can be other instances within the AML/CFT framework for associating transactions for other purposes – such as for the purpose of detecting suspicious transactions during the ongoing monitoring of a business relationship or in the context of the limit to large cash payments pursuant to Article 80 of Regulation (EU) 2024/1624 – this Regulation does not apply to those instances.

Business relationships and linked transactions are defined in respectively Article 2(1), points (19) and (20) of Regulation (EU) 2024/1624. In some instances, it is necessary to provide criteria to ensure that obliged entities identify business relationships and linked transactions properly and in a harmonized way throughout the Union. The objective of this Regulation is therefore to provide criteria that aim to reduce fragmentation throughout the Union and enhance the proper identification of these concepts where necessary. An important point to note is that, as business relationships and linked transactions are already defined in Regulation (EU) 2024/1624, these definitions should be leading in the obliged entity’s assessment whether a business relationship or linked transaction is established. This Regulation provides certain criteria for various elements of the definitions in Regulation (EU) 2024/1624. However, it is crucial to emphasize that the mere fulfilment of any criterion in this Regulation does not automatically indicate that the definition of a business relationship or a linked transaction in Regulation (EU) 2024/1624 is satisfied. The criteria in this Regulation are not conditional or exhaustive in relation to the definitions in Regulation (EU) 2024/1624. Consequently, a business relationship or linked transactions may exist even in the absence of any of the criteria specified in this Regulation.

Business relationships and occasional transactions are mutually exclusive. To clarify this, occasional transactions are defined negatively in the Regulation. For instance, a one-off donation via a crowdfunding intermediary will not meet the definition of a business relationship – since the elements of repetition or duration will not be fulfilled. In line with Article 1 in this Regulation, such a transaction would fall within the definition of an occasional transaction. This Regulation in general, and the definition of occasional transactions in particular, only apply to activities that fall within the scope of the AML/CFT framework. Consequently, activities that do not fall within the scope of the AML/CFT framework, cannot fall within the definition of an occasional transaction.

The Union’s AML/CFT framework applies to a wide variety of obliged entities. Some of these entities perform transactions, other obliged entities – for example real estate agents and notaries – provide services connected to transactions. The provision of services that falls within the AML/CFT framework can be provided in the context of a business relationship, as well as in the context of an occasional transaction. The latter is clarified in the definition of an occasional transaction. To assess whether the threshold for the application of customer due diligence measures is met, obliged entities should consider the value of the transaction or – in the case an obliged entity that does not perform transactions but instead provides services – the value of the transaction to which their services are connected, excluding any transaction or service fees.

An element of the definition of a business relationship is the expectation, or subsequent acquisition of an element of duration. The use of online services through a registration providing ongoing access should at least be taken into account when considering this element. This includes, for instance, the use of online services for online gambling, as well as the online services offered by payment service providers or crypto-asset service providers. Normally and by its nature, the use of online services after having gone through any form of registration implies that a certain degree of duration of the provision of services may reasonably be expected.

The second paragraph of Article 2 of this Regulation provides two criteria that should at least be taken into account by obliged entities in the non-financial sector that usually do not perform transactions themselves, but instead provide services, commonly connected to a transaction. The first criterion that should at least be taken into account when considering the element of repetition is the provision of services at different intervals. Many of the services provided by, for instance, notaries, lawyers, accountants, trust or company service providers, investment migration operators and tax advisors, are not circumscribed. Instead, the provision of service occurs at different intervals that point towards an ongoing engagement. For instance, a notary or lawyer managing a bank account or client money, as defined in Article 3(3)(b), points (ii) and (iii) of Regulation (EU) 2024/1624, provide this service at different intervals, which should be considered as pointing towards a repetition of the provision of services. This criterion should also be understood as the provision of one service regarding multiple objects. For instance, a client may be selling a property and purchasing another as part of a wider property chain. This ongoing engagement is characterized by repeated instructions, financial movements, and documents exchanges. By contrast, the provision of services by, for instance, a real estate agent regarding the buying of a property can be circumscribed as it is clarified in Regulation (EU) 2024/1624 that the services provided by real estate agents start to be relevant for AML/CFT purposes where there is a clear indication that the parties are willing to proceed with the purchase, sale, rental or lease or with taking the necessary preparatory steps. Such transactions therefore do not fulfil the criterion of occurring at different intervals. The second criterion that should at least be taken into account when considering the element of repetition is the provision of different services. This should be understood as the provision of different categories of services falling within the scope of the AML/CFT framework. The provision of different services points towards repetition by a customer.

The third paragraph of Article 2 of this Regulation contains specific criteria for considering the element of repetition for financial institutions that carry out currency exchanges, obliged entities engaged in the activity of money remittance and comparable services offered by crypto-asset service providers. Supervisory experience throughout the Union shows that these sectors do not only pose a higher risk for money laundering and terrorist financing, but also apply divergent approaches to the identification of business relationships and linked transactions. To mitigate the risks in these sectors, this Regulation provides the criterion of three transactions within a rolling period of 12 months that should at least be taken into account when considering the element of repetition in the definition of a business relationship. A rolling period of 12 months means that this criterion applies if three or more transactions occur within any 12-month period. The cumulative figure is not reset at, for instance, the end of the calendar year. Additionally, Article 3 of this Regulation provides the criterion of a rolling period of a month that should be taken into account when considering the element of a specific period in the definition of a linked transaction in these sectors.

Most transactions concerning football clubs will in practice fall within the definition of a business relationship, because the activities inherently meet the elements of repetition or duration. This is not necessarily the case for football player’s transfers. When considering the element of repetition, football clubs should at least take into account whether certain conditions apply to the transfer that lead to ongoing engagement. The addition of conditions to a transfer, for instance a bonus scheme, implies additional actions or money flows, that point towards the element of repetition. Transfers without any conditions can on the other hand lack the elements necessary for the fulfilment of the definition of a business relationship.

Regulation (EU) 2024/1624 stipulates that transactions should be linked if two or more transactions have an identical or similar origin, destination and purpose. Transactions should also be linked on the basis of other relevant characteristics. Both categories of linked transactions should take place over a specific period. Article 3 of this Regulation provides criteria for the different elements of the definition of linked transactions. Some of the criteria in Article 3 of this Regulation should only be taken into account based on information available to the obliged entity. This means that obliged entities should only take those criteria into account if the information on the basis of which this criterion could be assessed is already available to the obliged entity. This information could be available to the obliged entity for different reasons. It can be inherent to the business of the obliged entity to have access to certain information: for instance, crypto-asset service providers have access to the IP addresses of their customers. The obliged entity could also be obliged to have access to certain information on the basis of other regulations: for instance, Article 4(2), point (a) of Regulation (EU) 2023/1113 obliges the payment service provider of the payer to have access to the name of the payee. An obliged entity could also have obtained the information through observation: for instance, multiple people entering a currency exchange office and exhibiting behaviour that indicates that they are operating in concert. If the obliged entity has or should have access to information relevant to the assessment of the listed criteria, it should take that criterion into account. If the obliged entity, however, does not have access to the information and was not required to have access to the information, it is not required to acquire the information from the customer for the sole purpose of this Regulation.

Two or more transactions performed by different customers of the obliged entity might not appear to be linked. If the obliged entity, however, has the information available that customers are connected via family ties, this information should be taken into account. Family members should be understood broadly: it includes, for instance, spouses, parents and children. Other family ties can also be relevant, provided the obliged entity has information on the existence of these ties.

Customers operating in concert should at least be taken into account by obliged entities when considering the elements of identical or similar origin and destination, if the obliged entity has the information available. Operating in concert should be understood broadly: it includes, for instance, customers coming in together and customers coordinating between themselves before or during the transaction. The apparent use of the same digital infrastructure, if the obliged entity has the information available, should also be understood broadly. This includes, for instance, the same IP address, the same device identifier and the same geolocation. The use of the same digital infrastructure can be relevant for addressing attempts to circumvent the thresholds for customer due diligence measures via the use of more complex schemes. These schemes might consist of transactions that are individually below the thresholds and are performed by the same payer to different payees, vice versa or from many payers to many payees. When taken cumulatively, they can meet or exceed the threshold for customer due diligence measures.

Transactions pertaining to the same purchase should at least be considered as a criterion for the element of identical or similar purpose. This can take different forms: for instance, transactions pertaining to the same invoice, booking number or order. Payments in instalments should also fall within the scope of this criterion.

Transactions that share common characteristics can mean a circular movement of money across multiple accounts or jurisdictions, synchronized transactions or transactions being part of a series. When considering the element of other relevant characteristics, obliged entities should also take into account transactions with an identical or similar origin and destination that are performed through different establishments or via a network of agents or distributors. For example, if the obliged entity performs successive money remittances with an identical or similar origin and destination through its network of agents, this might point towards linked transactions. Similarly, betting activity by the same customer at different establishments of the same gaming operator should likewise be taken into account for the purpose of identifying linked transactions.

Another criterion that should be taken into account when considering the element of other characteristics is the participation by the same customer or customers that can be linked to that customer in a loyalty program offered by the obliged entity. This can take different forms: for instance, issuance of a loyalty card or the offering of discounts for the performance of multiple transactions or multiple purchases. It is important to emphasize that loyalty programs can also be used within the context of a business relationships. This criterion should therefore not be used for distinguishing between business relationships and occasional transactions.

When considering the element of a specific period, obliged entities should at least take into account transactions that are performed within a short period of time. The duration that constitutes a short period of time may differ significantly between obliged entities and the services they offer. Therefore, it should be considered on the basis of the nature of the business, including its risks and complexity and the size of the obliged entity.

Article 19(9), point (a) of Regulation (EU) 2024/1624 provides the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (‘the Authority’) with the mandate to develop draft regulatory technical standards specifying the obliged entities, sectors or transactions that are associated with higher money laundering and terrorist financing risk, to which a lower threshold for customer due diligence for occasional transactions should apply. Article 19 of Regulation (EU) 2024/1624 provides lower thresholds for specific sectors and transactions that pose higher money laundering and terrorist financing risk. The introduction of additional lower thresholds for customer due diligence for certain occasional transactions poses a burden on the obliged entities the lower thresholds apply to. Therefore, such additional lower thresholds should be justified by the provision of evidence of the need and proportionality of these thresholds. Since the entry into force of Regulation (EU) 2024/1624, no conclusive information has emerged indicating that any additional lower thresholds are necessary and proportionate to mitigate money laundering and terrorist financing risks across the Union. Consequently, this Regulation does not specify any additional lower thresholds for customer due diligence at this point in time. If in the future it becomes apparent that mitigation of money laundering and terrorist financing risks via the introduction of a lower threshold is necessary and proportionate for certain obliged entities, sectors or transactions, a proposal for amendment of this Regulation will be made.

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the Authority.

The Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based and analysed the potential related costs and benefits,