EU Regulation 2019/1148: A Closer Look at Its Impact to KYC/AML in the Chemical Sector

In the wake of the Paris and Brussels terrorist attacks, investigations revealed an alarming ease of acquiring chemicals for the illegal production of explosives. In response, the EU enacted Regulation (EU) 2019/1148 in July 2019 which introduced stronger controls, including:

  • EU-wide standardized enforcement
  • Fewer licenses issued to the general public
  • Stricter theft prevention and mandatory verification of intended use

Companies across Europe were required to achieve compliance by February 2021.

Key Impacts for Chemical Manufacturers

This regulation significantly affects chemical manufacturers, imposing new legal obligations:

  • Obtain customer statements and verified ID (either scanned copies or electronic verification)
  • Confirm authorization of individuals purchasing restricted substances on behalf of their company or institution
  • Verify that purchases align with the customer's stated intended use with respect to substance, concentration, and quality
  • Assess intended use for consistency with customer's business activities - reporting suspicious transactions and if inconsistency is found, potentially refusing sales
  • Ensure authorized receipt of goods including signed statements with business details and VAT/registration numbers
  • Maintain records of intended product use
  • Obtain proof of identity from customers' representatives

Downstream Responsibilities

These obligations extend to distributors and customers with central warehouses, placing the burden of compliance throughout the supply chain.

A Call for Greater Awareness

With the exception of a few companies - for example Diversy from which we sourced inspiration and information for this article, our research indicates that public communication regarding compliance with this regulation remains limited. This highlights a need for increased attention to the risk and its potentially serious consequences within the industry.

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