The key changes to be included in The Fifth Money Laundering Directive

Despite the awaited exit from the EU, the likelihood is that the EU’s Fifth Anti-Money Laundering (AML) Directive will also be implemented in the UK.

The changes are due by 10 January 2020 and for the first time will bring Art Dealers and Auction Houses into the regulated sector for anti-money laundering purposes.

As law enforcement departments gain further insight into the movement of laundered funds, the legislation seeks to crackdown upon key areas which have remained vulnerable.

Some of the key changes will include the following:-

• Definition of Politically Exposed Person clarified – Each member state must issue a list setting out which functions qualify under this category as prominent public functions.

• Improved transparency of Beneficial Ownership of Corporate Entities – Wider access to each Member States Central Register of Beneficial Ownership of Companies and Entities comes into force to provide increased transparency. The objective is to ensure that any member of the public can access minimum information without needing to demonstrate a legitimate interest.  Companies House has already provided this basic level of access for some time. There is also a new requirement for what is termed “Obliged Entities” to report any discrepancies found between information held and the information on the Register.

• More information on the Beneficial Ownership of Trusts – The next Directive will extend the reporting requirements for the Beneficial Ownership of Trusts which would also result in a Central Register of Beneficial Ownership being available to those showing a legitimate interest in the Register. The Member States have been left to define what a legitimate interest may be with the key focus upon ensuring that preventative work in undertaking Due Diligence can be assured.

• Ownership Details for Safe-Deposit Boxes – No longer will it be possible to have an anonymous safe-deposit box with there being a legal requirement now for identity papers to be taken.

• The Prepaid Cards to have Increased Due Diligence – There was previously a threshold of €250 for gift cards and prepaid cards of this type. This limit has now been reduced to €150.

• New Technologies – Virtual currency exchange platforms will now be subject to AML laws as they too are included as Obliged Entities.

• Use of Electronic Identification – Contrary to previous legislation, under the Fifth Money Laundering Directive the use of Electronic Identification for customer Due Diligence will be permitted.

Whilst at time of posting this it is unclear as to how the UK will implement the Directive post Brexit, the desire to remain a leading financial centre is unlikely to see the UK fall behind other countries in their compliance with legislation targeting Money Laundering and Terrorist Financing.

Make sure you are compliant!

For further advice and assistance please contact our Private Client Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk