Intragroup services: Is there any chance for exemption from AML obligations?
Shared-services centres functioning within a group may formally have the status of an “obliged entity” under anti money laundering and countering financing of terrorism regulations, even though the AML/CFT risk associated with their operation is minimal in practice. Is there any chance that the EU’s AMLR, which enters into force on 10 July 2027, can change this situation?
Under the existing AML/CFT provisions, a range of institutions have the status of “obliged entities.” This means that they must verify the identity of their clients, assess the risk of money laundering, report suspicious transactions, and apply appropriate financial security measures.
The catalogue of obliged entities is set forth in Art. 2 AMLD (Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing). The AML Directive was implemented into the Polish legal system by the AML Act (Act on Combating Money Laundering and Financing of Terrorism of 1 March 2018).
Significantly for the discussion below, neither the AMLD nor the AML Act implementing it contains exemptions for entities providing intragroup services. Consequently, many entities acting as SSCs, providing for example accounting, legal or tax services solely to entities in the same corporate group, are formally regarded as obliged entities. Thus they must implement the full AML regime—including KYC procedures, risk assessment, and reporting of suspicious transactions—even though the AML/CFT risks associated with their operations are extremely low in practice.
New rules will enter into force on 10 July 2027 based on the AMLR (Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing). Is there a chance of softening the requirements for SSCs under the AMLR?
AMLR and intragroup services
It seems that EU lawmakers have identified the disproportionality of imposing AML duties on entities which have acquired the status of an obliged entity solely because they provide certain services to other entities in their own corporate group. As stated in recital 11 of the preamble to the AMLR, “Financial transactions can also take place within the same group as a way of managing group finances. However, such transactions are not undertaken vis-à-vis customers and do not require the application of AML/CFT measures. In order to ensure legal certainty, it is necessary to recognise that this Regulation does not apply to financial activities or other financial services which are provided by members of a group to other members of that group.”
This sounds promising, but there are a few details that could impede implementation of the apparently clear intent of the drafters.
First, recital 11 AMLR does not refer to any and all intragroup services and transactions whose performance may lead to classifying a group entity as an obliged entity. The recital refers only to intragroup financial activities or other financial services. The AMLR does not define “financial services” or “financial activity,” but these notions do not appear to fully coincide with the types of activity whose performance ordains that a unit will obtain the status of an obliged entity. For example, it is doubtful whether legal or tax consulting, or accounting services, which are very frequently performed within corporate groups, would be regarded as “financial activity” or “financial services.”
Second, the exemption that can be gleaned from recital 11 of the preamble is not reflected in the main text of the AMLR. And under the established case law of the Court of Justice of the European Union, “the preamble to a Community act has no binding legal force and cannot be relied on either as a ground for derogating from the actual provisions of the act in question or for interpreting those provisions in a manner clearly contrary to their wording” (C-136/04, Deutsches Milch-Kontor, among other cases). The preamble serves as an important auxiliary element for interpretation, which may clarify the drafters’ intent, but is not a separate legal basis for asserting a claim, or a shield against liability for violating the regulations. Thus relying only on the preamble when deciding whether and to what extent the AMLR applies to a specific entity is a risky strategy.
So how to carry out in practice the intent expressed by the drafters in recital 11 AMLR? An answer may come from the EU regulator. Because the AMLR does not contain a definition of “customer,” which is a key concept for determining the scope of duties of obliged entities, it cannot be ruled out that in the future, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will issue guidelines or interpretations providing more specific content for this concept. A touchstone for such an interpretation could be recital 11, suggesting that intragroup transactions “are not undertaken vis-à-vis customers.”
Does the case law from the Court of Justice meet the market’s expectations?
It should be noted that the status of entities providing intragroup services has at least partially attracted the interest of the Court of Justice. In the relatively recent case C-3/24, Mistral Trans, the court interpreted the notion of “external accountants” under Art. 2 AMLD, i.e. one of the categories of obliged entities named in the directive. However, it must be stressed that the judgment in Mistral Trans does not offer a general resolution of the issue of intragroup services in the AML context, but is limited to interpreting one specific concept.
In the narrow analysis in that case, the Court of Justice explained that the notion of “external accountants” “refers to natural or legal persons whose professional activity consists in independently providing accounting services, such as the preparation, keeping or auditing of accounts, to third parties.” But, of particular relevance for SSC practice, the court also stated that “a legal person that keeps the accounts of companies related to it, with a view to pooling resources, does not fall within the scope of that concept.”
Thus the ruling in Mistral Trans is advantageous for SSCs conducting accounting services, but only in terms of classification on that one ground. The judgment does not resolve the general question of whether entities providing other intragroup services (e.g. legal or tax) can be relieved of AML duties. And we should be cautious in relying even on this limited holding, for several reasons:
- Court of Justice rulings are not universally binding. A judgment of the Court of Justice issued in response to a request for a preliminary ruling is formally binding only on the national court that made the request in the specific case. Such judgments are not effective against all persons (erga omnes) and are not directly binding on other national courts or administrative bodies.
- Court of Justice case law can evolve. While it is true that under the doctrine of acte éclairé, a ruling by the Court of Justice interpreting a given provision of Community law also applies in later cases, this doctrine does not prohibit national courts from requesting preliminary rulings on similar issues. Nor does it prevent the Court of Justice from issuing a different ruling if new factual circumstances or legal arguments are raised.
- Mistral Trans has not been officially confirmed by supervisory authorities. The interpretation made in this judgment has so far not been officially cited or adopted by AML/CFT authorities at the EU level.
- The ruling is not reflected in the AMLR. The holding in Mistral Trans is not reflected in the wording of Art. 3(3)(a) AMLR, which—despite the intent expressed in the preamble of excluding intragroup entities—does not contain an express exemption for entities providing accounting services solely to other entities in the same corporate group.
It should be noted, however, that the bill to amend the Polish AML Act includes a change in the list of obliged entities which seemingly reflects the holding in Mistral Trans. Specifically, legal persons providing accounting services solely to companies in the same corporate group would be excluded from the catalogue of obliged entities (AML Act Art. 2(1)(17)). This is the same category found by the Court of Justice not to be covered by the notion of “external accountants” under the AMLD.
But at the same time, the proposed amendment of the AML Act does not provide for more extensive changes in the catalogue of obliged entities, and does not exclude AML/CFT duties with respect to other entities that have obtained this status solely due to intragroup activities. In particular, the bill does not propose changes in AML Act Art. 2(1)(15a), which includes in the catalogue of obliged entities undertakings whose principal economic activity is performing services involving preparation of declarations, maintaining accounting books, or providing advice, opinions or clarifications on tax or customs law, which are not otherwise obliged entities. Such activity is commonly performed as well by entities conducting bookkeeping services for other group entities. Consequently, in practice, the proposed advantageous change to Art. 2(1)(17) of the AML Act may not radically alter the situation of entities providing intragroup accounting services.
Summary
The situation under the EU’s AML Regulation of entities providing intragroup services is not a foregone conclusion. Perhaps contrary to the hopes placed in it, the AMLR does not offer a clear resolution, as the drafters’ intent stated in recital 11 is not carried over to the main text of the regulation.
The judgment of the Court of Justice in C-3/24, Mistral Trans (as well as the planned amendment of the Polish AML Act) constitutes a step in the direction of carrying out that intention, but it refers only to accounting services, does not exert effect erga omnes, and does not fix the direction that may be taken in future rulings.
Exclusion of intragroup entities from the AML regime may not come until guidance is issued by the AMLA, or based on positions and practices of the Polish supervisory authorities. Until such guidance is issued, entities acting as shared-services centres should maintain caution in taking radical decisions as to their status under the new rules, and closely monitor the further development of regulations and decisions in this area.
Joanna Werner, attorney-at-law, Banking & Project Finance practice, New Technologies practice, Amelia Niemiec, Banking & Project Finance practice, Wardyński & Partners
