On the 10th January 2020, the fifth anti-money laundering directive (5MLD) will become law throughout the European Union.
5MLD builds on the Fourth Anti-Money Laundering Directive, which came into effect June 2017, and aims to further combat financial crime by boosting existing transparency rules. 5MLD also aims to ensure a tightening of current European regulations to prevent money laundering and the financing of terrorist activity.
For those working in regulated sectors, the requirements of 5MLD will have to be met. Fail to do so, and significant penalties may occur.
Below we run through the 5 key requirements and changes as detailed in 5MLD:
1. E-Money Products
With the 5MLD, there will be strict conditions for the issuing of e-money. First, the limit for prepaid cards will be lowered from 250 Euro to 150 Euro. Online transactions with prepaid cards will also be limited to max 50 Euro.
What’s more, you will only be able to use e-money to process payments if the e-money was issued in a third country with an acceptable level of anti-money laundering prevention. This means there will be restrictions on anonymous prepaid cards issued in third countries, and it could lead to payment cards from certain countries no longer being accepted in the EU.
2. Virtual Currencies
Virtual currency exchange platforms convert real currencies into virtual currencies, and the 5MLD will clamp down on virtual currency regulations to help combat money laundering and terrorism financing.
With 5ALMD, cryptocurrencies will face regulation for the first time. Like traditional financial institutions do, cryptocurrency exchanges will now have to submit suspicious activity reports and perform customer due diligence. So, if cryptocurrency exchanges know or suspect any money laundering or terrorist financing, it is their duty to report this to authorities.
3. Public access to beneficial ownership information
Under 5MLD, registers of beneficial ownership information created under 4AMLD will now be made accessible to members of the public. This means EU member countries must establish a national register of beneficial ownership information, covering businesses, trusts and those who have safe-deposit boxes. All this information as stated on the register will be available to share with other EU member countries.
Companies in the EU will have to keep current information on their beneficial ownership, and this too will have to be sent to the central register. If companies fail to do this, there will be significant penalties and sanctions put in place.
4. Better access of FIUs to information
The Financial Intelligence Unit (FIU) will also have more rights access to information with the passing of 5MLD. The FIU will be allowed access to the centralised national registers, as outlined above and electronic data retrieval systems, which will grant them information and access to the identity of bank account holders and property owners. This is aimed to help combat money laundering and financing of terrorist activity.
What’s more, the 5th anti-money laundering directive means that people who have virtual currency will no longer be anonymous. The FIU will now, by law, have to get the names and addresses of each person who possesses a virtual currency.
due diligence in high-risk countries
Under 5MLD, nations that are deemed at a high-risk of money-laundering or terrorist financing will be placed on an inspection list and forced to undergo more intensive checks when money is moved from them into the EU. Businesses will also be required to carry out their own due diligence checks on transactions with high-risk countries.
Failing to meet the requirements of 5MLD can mean businesses facing fines up to a maximum of €5 million or 10% of annual turnover, or a complete block on trading. If you are a business owner, it’s imperative that you follow the guidelines.
To find out more about anti-money laundering services for individual and business use, please get in touch with a SmartSearch representative.