From 10 January 2020, the Fifth Anti-Money Laundering Directive (2018/843) is in force in the UK and around the European Union. The changes are not as extensive as those that were introduced in the Fourth Directive, such as the concept of risk based due diligence, but the Fifth Directive will impact an increasing number of businesses who must now have regard to money laundering laws.
What is Ultimate Beneficial Ownership?
A beneficial owner is any person controlling or owning more than 25% of the shares or voting rights. The details of beneficial owners must be recorded and held on a central register accessible to competent authorities. Ultimate beneficial owner refers to someone who ultimately owns or controls the customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. An ultimate beneficial owner (UBO) is always a natural person.
On 10 January 2020 the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force. This statutory instrument updates the UK’s existing anti-money laundering legislation to take into account the Fifth Directive.
The 2019 Regulations amend:
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs)
From 10 January 2020, the Fifth Anti-Money Laundering Directive (2018/843) is in force in the UK and around the European Union. The changes are not as extensive as those that were introduced in the Fourth Directive, such as the concept of risk-based due diligence, but the Fifth Directive will impact an increasing number of businesses, such as art dealers and cryptocurrency companies who must now have regard to money laundering laws.
Businesses, such as law firms, banks, accounting firms, FCA regulated companies and estate agents who already have AML procedures in place will likely need to make only small modifications to their procedures.
Training plan recommendation
VinciWorks does not recommend that companies or law firms that regularly train on AML (every 12–18 months) make any significant changes to their training schedule because of the new directive.
The UK is obligated to transpose Directive (EU) 2018/843, commonly known as the Fifth Money Laundering Directive (5MLD), into national law by 10 January 2020. Despite Brexit and the flexible date of Britain leaving the EU, the terms of the implementation of 5MLD are set out in the Withdrawal Agreement between the UK and European Commission. Even if such an agreement doesn’t end up being the foundation of Brexit, the 5th Directive will need to become law in the UK.
In April 2019, the UK government launched its consultation on transposing the Fifth Directive into UK law. It contains a number of important expected changes and additional obligations all compliance officers should know about. For those who wish to respond, the consultation is running until 10 June 2019.
Here, we provide a comprehensive accounting of all the key changes compliance officers should know about the Fifth Directive.
The Fifth Money Laundering Directive is set to be transposed into national law by 10 January 2020. The core aim of the 5MLD is to address modern-day money laundering concerns that were not covered in the Fourth Directive. The main changes are focused on enhanced powers for direct access to information and increased transparency around beneficial ownership information and trusts. One of the challenges surrounding money laundering, which was far less of a risk when the Fourth Directive was being drafted, is cryptocurrencies.
What are cryptocurrencies?
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Today there are over 3,000 cryptocurrencies across the world, with Bitcoin being the first one to enter the market and the clear market leader.
The SRA announced earlier this year that it would be launching a crackdown against firms who fall foul of money laundering procedures.
As an initial assessment, the SRA wrote to a sample of 400 out of the approximately 7,000 SRA-regulated firms required to comply with the Money Laundering Regulations 2017, asking them to demonstrate compliance with the regulation. The SRA was mainly checking that firms have a money laundering risk assessment and implementation plan in place. The assessment came in response to an increase in dirty money entering the UK and a lack of reporting of suspicious activity by lawyers and accountants, with lawyers often seen as an easy target for laundering money.
The Fifth Money Laundering Directive is set to be transposed into national law by 10 January 2020. The 5MLD came about in response to terrorist attacks across the EU and offshore leaks investigated in the Panama papers. The core aim of the 5MLD is to address modern-day money laundering concerns that were not covered in the Fourth Directive. One of the key changes to money laundering regulations that the Fifth Directive will bring is that Member States will have to implement enhanced due diligence (EDD) measures to monitor suspicious transactions involving high-risk countries more strictly.
How will the Fifth Money Laundering Directive affect enhanced due diligence?
The Fifth Directive will require enhanced due diligence when dealing with transactions from high-risk countries. As well as obtaining evidence of the source of funds and source of wealth, information on beneficial ownership and the background of the intended transaction must also be recorded. The EU may also designate a ‘blacklist’ of high-risk countries for money laundering.
Money laundering is a worldwide crime that is estimated to total over $2 trillion annually. In the past 20 years, laws have been put in place in the UK to crack down on this crime. This includes Client Due Diligence (CDD) procedures your firm must follow to ensure that your firm is not assisting in money laundering activities. When staff or businesses witness any suspicious activity, they are required to submit a suspicious activity report (SAR). Here is a short guide to what a SAR consists of and how to submit one.
UK estate agents were hit last week with surprise HMRC inspections as part of a week-long crackdown on money laundering in the property industry.
HMRC paid surprise visits to estate agents after they were suspected of trading without being registered as required under money laundering regulations. In all, agents in London (35), Leicester (5), South Bucks and Berkshire (4), Greater Manchester (3), Watford (1), Wakefield (1) and Wolverhampton (1) were raided in order to determine their compliance with money laundering regulations of 2017.