5AML is on its way – what are the key changes?

1st May 2019 3538 - Blog Posts

The Fifth Anti-Money Laundering Directive is on its way, having been passed by the EU, and it is due to come into force in January 2020. The good news from a compliance perspective is that the latest iteration of the directive is more a series of amendments to the 2017 directive, rather than a complete overhaul. How will your firm manage these changes, is it time you understood the benefits of AML software or gained expert knowledge from Compliance Consultants?

What are the key changes?

One of the main points of focus for 5AMLD is to crackdown on terrorism, strengthening the controls and measures under the Money Laundering Terrorist Financing and Transfer of Funds Regulation 2017. Cryptocurrencies have also come under the spotlight in this directive, as regulators become increasingly concerned that their anonymity and relatively light regulation make them especially attractive to cybercriminals. Under 5AMLD, cryptocurrencies and exchanges would face the same AML regulations applied to financial regulations under the Fourth Directive, including mandatory registration for cryptocurrency exchanges and an obligation to submit suspicious activity reports.

Enhanced due diligence

Another key amendment is the enhanced due diligence that will be introduced to deal with transactions from countries deemed to be high risk. As well as the current obligations to obtain evidence of the source of funds and wealth, information on beneficial ownership and the background to a transaction must also be recorded. In addition, the EU has broadened its ‘blacklist’ of high-risk countries that it deems to have serious deficiencies in their AML and counter-terrorism regimes. The directive has broadened the criteria for identifying such countries, to include availability and exchange of information on the beneficial owners of legal persons and legal arrangements. The new list now includes 23 countries, and it has already received criticism particularly from the US, which has four territories on the list. Responding to the addition of Puerto Rico, Guam, American Samoa and the US Virgin Islands, the US Department of the Treasury said it has: “significant concerns about the substance of the list and the flawed process by which it was developed.”

Lawson Conner’s future proof AML software, MaxComply works to support firms to significantly reduce processing time, costs and resources.

Other amendments under 5AMLD

Some of the other amendments made under 5AMLD include new national bank account registers so that the Financial Intelligence Unit can access bank account information even without a suspicious activity report, and the cessation of anonymous accounts such as safety deposit boxes and passbooks. Increasing transparency of beneficial owners is also coming into force, although exactly how this will play out is still somewhat unclear. While there will be greater public access to the beneficial ownership register of corporate entities and trusts, it will be limited to those with a ‘legitimate interest’, and as yet legitimate interest has not been defined by the UK regulatory authorities.

5AMLD and Brexit

It’s unclear exactly how much of 5AMLD will be transposed into British law in the case of a hard Brexit but it is anticipated that the UK will look to adopt 5AMLD, in order to signify its stance on combating money laundering and the financing of terrorism and seek continuous access to the UK markets. Financial services firms should familiarise themselves with the amendments in 5AMLD and prepare to implement them by the January deadline.

At Lawson Conner, we provide expert compliance consulting on all aspects of money laundering prevention, including the upcoming changes, as well as access to our KYC and AML software solution, which could significantly reduce processing time, cost and resources for your firm.

Andrew Frost Executive Director - Lawson Conner

Andrew Frost

Executive Director

E: afrost@lawsonconner.com

D: +44 (0) 203 696 2568