Last September saw the coming into force in Portugal of Law No. 83/2017, which establishes anti-money laundering and terrorism financing measures, partially transposing Directive 2015/849/EU, of the European Parliament and of the Council, and Council Directive 2016/2258/EU (the so called 4th Directive).
This legislation arose in the context of an FATF assessment of Portugal and at a time when there is already talk about a 5th Directive, which means that it must be read within that framework. Going beyond the 4th Directive in many respects (perhaps already influenced by the discussions for a 5th Directive and/or marked by the "good student" syndrome), this lengthy legislation expands the array of affected entities, fleshes out duties and lays down extensive and weighty liability provisions for criminal and regulatory offences. It is a true code (though packed with "regulatory" or "circular" matters) and very often leaves a great deal of doubt as to the line between prevention and punishment.
It is still too early to know its true reach and impact for the many organisations and entities concerned. We believe that only time will allow us to grasp its applicability, its effects and the true role the competent and enforcement authorities will play in its application and enforcement. But on a first impression, one question should be asked: is there even room for a risk-based approach? The fact is that despite the term "risk" being mentioned over two hundred times throughout the legislation, the minimum contents, the default fleshing-out and the provisions regarding what, "at least", the entities concerned are subject to and which cannot be forgotten in the implementation of the various duties, can only raise doubt as to how the competent authorities will exercise their inspection and oversight powers.
It will perhaps be easy to "choose", within the scope of the competent authority's powers, one of the 90-plus regulatory offences laid down in the law. Yet one wonders whether it would not be more efficient, for the purposes of the legislation, to help the entities concerned to navigate this new sea of duties and obligations, promoting awareness of its terms and clarifying the various doubts to which it gives rise.
While there are duties and obligations which may be more easily perceivable for financial entities – given the regulations these were already familiar with and the nature and activity of such entities –, many of the other (and some new) entities concerned will be facing, for the first time, the need for an almost complete reformulation of their internal control systems to be able to comply with the imposed requirements. With no assistance, with no specialised knowledge, with no structure and with no resources (financial, human, technical, etc.), it will be hard to put everything that is required of them into practice, engendering the risk that not only will they be unable to meet the desired objectives but that possible interest may arise in "alternative" ways of framing the activities or use of the (para)financial system to avoid the application of the legislation and being subject to its duties.
In other jurisdictions, we have seen the transposition of a 69-article directive by means of legislation that is subsequently regulated or subjected to interpretational guidelines. In Portugal, such transposition was made by means of a 191 – article law, that will still be regulated. One can but wonder: was such extensive legislation actually necessary? Are we not inserting in primary legislation content that is best left to the regulations of the various regulatory bodies for each sector? And, by so doing, are we not blindly extending the "normal" terms governing financial entities and credit institutions in particular to all other financial and non-financial entities, despite the references to the necessary changes depending on the nature of the activity in question?
Besides being innovative in many aspects, the framework in force now in Portugal will require an effort on the part of the entities concerned to adapt, as well as a considerable investment. However, the competent authorities too are facing a new paradigm, focused on cooperation, which will pose several challenges for the pursuit of their powers. In a (brave?) new world, the cooperation that would bear fruit for the paradigm it is sought to impose and the goals it is desired to reach would clearly be a cooperation model between the entities concerned and the competent authorities; one where instead of a reign of distrust and the propensity towards punishment which is often seen and which is perhaps fostered by this legislation, information sharing, mutual assistance and discovering true ways of preventing and combating money laundering and terrorism financing together would be better. This new legal framework even supplies some means to this end, but it remains to be seen whether and how they will be used.