The Fifth Money Laundering Directive and Legal Compliance
5AMLD is supposed to build on the Fourth Anti-Money Laundering Directive's attack on financial crime by boosting existing transparency rules. As a result, those working in financial services will need to meet new requirements as 5AMLD targets areas which have so far not felt the force of previous directives. And let's be clear – the new requirements are significant and carry equally significant penalties for individuals who neglect to meet them. The onus, therefore, has to be on compliance.
For the first time, cryptocurrencies will face regulation which was put on classical banking institutions under 4AMLD. Cryptocurrency exchanges will now need to perform customer research and submit suspicious activity reports – just like anyone employed in britain's regulated sector is needed to under Part 7 from the Proceeds of Crime Act 2002 and the Terrorism Act 2000 – if they know, suspect and have reasonable grounds for knowing or suspecting, that a person is involved in, or attempting, money laundering or terrorist financing. Virtual currencies will also be set to get rid of their anonymity as EU Financial Intelligence Units will have to gain the names and addresses and identities of those who possess such currencies.
5AMLD obliges payment companies to handle checks on customers using prepaid credit cards carrying funds in excess of EUR150 -the 4AMLD limit was EUR250 – and payment providers will have to ensure the identity is known of anyone authorising a remote payment in excess of EUR50. Inside a further 3 years, validation is going to be required for all remote payments and prepaid cards issued outside the EU is going to be prohibited unless they're issued by a nation that has anti-money laundering legislation as strong as that in the EU.
5AMLD comes down to one thing: knowing your company. The EU wants its latest directive to take the fight to money laundering. This tightening of restrictions and removal of loopholes is being done by placing greater obligations on those who work in business – and business cannot afford to disregard it.
Under 5AMLD, EU member states must set up a national register of beneficial ownership information that covers businesses, trusts and even those possessing safe-deposit boxes. The information on each member's register ought to be open to share with other members and the records have to cover anyone who has a 25% or greater stake inside a company. But it is the businesses that has to make use of this to make all of the necessary checks to establish exactly who a company's beneficial owners are before they have any dealings with it.
5AMLD also requires those in business to handle what comes down to research on countries. Nations deemed to become high-risk due to their insufficient effective anti-money regulations and research requirements are put with an EU listing of states that need more intensive checks when cash is moved from them into the EU. There is an obligation on regulated businesses to view their list and ensure that their research procedures reflect the risk posed by financial movements from such countries.
Such obligations, it must be said, are not mere bureaucracy. Neglecting to qualify of 5AMLD often means fines up to a maximum of EUR5 million or 10% of annual turnover. Once the resulting negative publicity is considered, combined with the fact that individuals can be banned from managing a regulated business as well as an organisation can be prevented from trading, the effects of neglecting to meet 5AMLD's requirements can't be ignored.
5AMLD looks to focus on crime. But it is business that has got to make sure it is equipped to carry Anti-Money Laundering burden the directive brings. Basic due diligence checks might not be adequate for that responsibilities that 5AMLD is placing squarely around the shoulders of economic. The best controls, procedures that has been enhanced levels of staff awareness are essential. 5AMLD is extending what is expected of businesses. Not meeting those expectations could be very costly. Taking the right legal advice can now ensure compliance with all facets of 5AMLD. It is not being too alarmist to state that a failure to do this can be to be the biggest mistake a lot of companies make in 2021.
