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5MLD: HM Treasury consults on new EU money laundering rules

HM Treasury has recently published a consultation paper in which it proposes to implement the fifth money laundering directive (5MLD) in the UK. Amongst other things, HM Treasury is consulting on the following:

  • Cryptoassets: 5MLD expands the scope of the anti-money laundering and counter terrorist financing (AML/CTF) regime to capture providers engaged in exchange services between cryptoassets and fiat currencies and custodian wallet providers. It is proposed that the Financial Conduct Authority take on supervision of such cryptoasset service providers for AML/CTF purposes. HM Treasury's view is that all relevant activity in respect of exchange tokens, security tokens and utility tokens should now fall within the scope of the UK's AML/CTF regime.

Notably, however, HM Treasury is also consulting on extending the AML/CTF regime to additional cryptoasset service providers, such as crypto-to-crypto exchange service providers and cryptoasset ATMs. This could potentially represent a significant expansion of the UK's AML/CTF regime beyond the requirements of 5MLD.

  • Enhanced customer due diligence (EDD): The requirement to conduct EDD is expanded by 5MLD to "business relationships or transactions involving high-risk third countries". The government is consulting on whether a broad definition of "involving" in this context would have unintended consequences.
  • Trust registration service (TRS): Under 5MLD, all UK resident express trusts will now be required to register as opposed to express trusts with UK tax liabilities as at present. In addition, 5MLD requires: (a) non-EU resident express trusts which acquire UK land or property either on or after 10 March 2020; and (b) non-EU resident express trusts which enter into a new business relationship with a business subject to the UK's AML/CTF regime on or after 10 March 2020 to register with the TRS. HM Treasury is seeking views on what information should be collected as part of the registration process, registration deadlines and what constitutes a "legitimate interest" for the purposes of requests for information about TRS-registered trusts.

5MLD must be transposed into UK law by 10 January 2020. As the consultation acknowledges, by implementing 5MLD, the government is catering for a scenario where an implementation period is in place after the UK leaves the EU. Brexit considerations aside, 5MLD represents a notable strengthening of the UK's AML/CTF regime whilst not being the radical overhaul which 4MLD was. This consultation will be of interest to entities currently subject to 4MLD as well as new entities within scope, such as cryptoasset exchanges, as well as UK and non-EU trusts. The consultation ends on 10 June 2019.

5MLD contains amendments to 4MLD which will improve transparency and the existing preventative framework to more effectively counter ML/TF across the EU.

Tags

financial services, banks and alt lenders

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