Financial Regulation Update: 5th AML Directive – Now In Force
24 September 2018
The Fifth Anti-Money Laundering Directive (MLD5) is a response to recent trends in money laundering and terrorist financing. EU lawmakers felt the Fourth Anti-Money Laundering Directive (MLD4), which has yet to be transposed into Irish law, did not adequately address the recent trends.
The key changes being introduced by MLD5 include:
- Certain trusts and similar legal arrangements will be required to disclose their beneficial owners. EU Member States will be required to enact domestic legislation to identify the trusts and legal arrangements the MLD5 rules will apply to.
- The requirement for a member of the public to prove that they have a legitimate interest to view the central register of beneficial ownership for legal entities will be removed under MLD5. However, only competent authorities, financial intelligence units and professional sectors that are subject to anti-money laundering will have an automatic right to access the beneficial ownership data of trusts and other legal arrangements. A member of the public will only be granted access to view the central register if they submit a written request demonstrating a legitimate interest in the data.
- Due diligence requirements for high-risk countries will be increased.
- Art dealers, tax advisors, letting agents and crypto currency exchanges will fall within the scope of MLD5.
- The threshold below which due diligence does not need to be carried out for pre-paid financial instruments, for example prepaid cards, where the instrument is not reloadable or has a maximum monthly limit, will be reduced from €250 to €150. This reduction was largely brought about by the use of these instruments to hire rental vehicles that were used in terrorist attacks.
- virtual currency exchange platforms and custodians in the EU will need to carry out due diligence on customers who seek to convert crypto-currency to Euro;
- The EU’s financial intelligence units, or FIUs, are responsible for receiving and analysing information from private entities on financial transactions that are considered to be linked to money laundering and/or terrorist financing. Under MLD5, FIUs will have wider powers to request, obtain and use information to prevent, detect and combat money laundering and terrorist financing. The ability of FIUs to receive and share information will be increased and EU Member States will be required to have a centralised automated mechanism that will identify persons who hold or control payment accounts and bank accounts. National FIUs will then share that information with FIUs in other EU Member States;
- A list must be maintained in each EU Member State setting out what functions qualify as “prominent public functions” for the purpose of determining who constitutes a politically exposed person.
- Greater protection, including anonymity, will be given to whistleblowers.
Despite the fact Ireland has yet to transpose MLD4, the world of money laundering and terrorist financing is fast paced and steps need to be taken to ensure the legislation keeps up. Further initiatives should be expected with the growth of virtual currencies and the challenges their use will bring.
For more information on MLD4 and MLD5, contact a member of our Financial Regulation team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.