Today, the agreed text of the Fifth Anti-money Laundering Directive (5MLD) is published in the Official Journal of the European Union. 5MLD evolved due to concerns around new trends in terrorist financing, tax leaks, the introduction of cryptocurrencies and to keep pace with other technological innovation. 5MLD makes amendments to the existing Fourth Anti-money Laundering Directive (4MLD) and must be implemented by member states by 10 January 2020. Despite the UK's planned withdrawal from the EU, it is likely that the UK government will implement rules equal or similar to the changes introduced by 5MLD, in order to retain its standing in the financial markets and potential equivalency in the eyes of the EU regulators.
Among other things, 5MLD:
- extends the scope of 4MLD to virtual currency exchange platforms and custodian wallet providers;
- lowers the threshold for the indication of ownership or control to 10 per cent (from the previous 25 per cent), for certain limited types of entities which present a specific risk of being used for money laundering and tax evasion;
- lowers (from €250 to €150) the thresholds for non-reloadable pre-paid payment cards to which certain customer due diligence (CDD) measures apply and suppresses the CDD exemption for online use of prepaid cards;
- allows Member States to require entities falling under the legislation to apply enhanced CDD measures when involved in higher-risk cases or when dealing with entities established in high-risk countries;
- extends beneficial ownership information requirements to trusts and other types of legal arrangements having a structure or functions similar to trusts;
- ensures that the beneficial ownership central registers are interconnected;
- permits Member States to make the beneficial registers publicly available through online registration and payment of a fee;
- requires firms to report discrepancies they find between the beneficial ownership information available in the central registers and the beneficial ownership information available to them;
- enables financial intelligence units to request information on money laundering and terrorist financing from any entity within scope of the 4MLD; and
- ensures Member States put automated centralised mechanisms in place, (e.g. central registries or central electronic data retrieval systems) which allow for the timely identification of any natural or legal persons holding or controlling payment accounts, and bank accounts held by a credit institution within their territory, and ensuring that the information held in those centralised mechanisms is directly accessible, at national level, to financial intelligence units and competent authorities.
Firms not affected by the extended scope of the activities falling under 4MLD may still be affected by some of the requirements - in particular, the extension the beneficial ownership information requirements to trusts and the provisions which apply to high risk countries. The FCA undoubtedly will publish a consultation paper on implementation of the provisions in due course.