The European’s Union 5th Anti Money Laundering Directive comes in force on January 2020. What are the main updates you need to focus?
The main updates of the 5th AML Directive are:
The new directive extends to new sectors such as crypto currencies and custodian wallet providers, real estate agents and rental intermediaries and finally art dealers.
Places greater emphasis on transparency around ultimate beneficial ownership in an attempt to fight financial criminals who hide behind complex corporate structures. A best practice approach to 5th AML Directive compliance includes ensuring access to trusted data, as well as having the right tools to streamline risk mitigation processes.
There are six important changes in AML rules to note.
Crypto currencies will face tighter controls, with exchanges being required to register with the relevant authorities in their jurisdictions, conduct customer due diligence, and prepare suspicious activity reports where these are deemed necessary. Moreover, Financial Intelligence Units will be required to keep records —names and addresses — of those purchasing virtual currency.
The new Directive emphases more on transparency around ultimate beneficial ownership (UBO) as part of a targeted attempt to fight back against financial criminals who hide behind often complex and opaque corporate structures. Member states will be required to maintain inter-connected, publicly available national UBO registries. Separate registries for bank accounts must also be created, although these will only be accessible by authorities. UBO regulations will extend to trusts.
The new directive requires state members to create functional PEP lists that include all titles, roles or functions that are deemed to be politically exposed. Since incumbents within these positions change on an ongoing basis, the actual incumbent at the time of creating the list should not be included, but rather the title of the position itself.
The 5th AML Directive, also focuses on the storing and moving funds via high valued goods. It extends the range of goods that will be subject to reporting requirements and regulatory enforcement. Art, oil, arms, precious metals, tobacco, historical, cultural and archaeological artefacts are all included.
Enhanced due diligence for high risk countries
When dealing with high risk countries, companies will be required to perform enhanced due diligence, which may also include Source of Wealth investigations. High risk countries are those identified by the EU as having sub-standard AML regulations.
The 5th AML Directive tightens the limits for monthly transactions on prepaid cards, by dropping the limit from €250 to €150, with a €50 online/remote limit applicable. In addition, only cards issued within the EU are allowed, unless they were issued in a country with legislation that is deemed on par with EU AML standards.