5AMLD – the Fifth Anti-Money Laundering Directive – comes into force on January 10, 2020. Based on the regulatory regime that was applied to the previous 4AMLD Directive – this document aims to strengthen the AML/CFT of the European Union, which will help to find effective solutions to some of the existing problems and those that arise now. 5AMLD has a broad influence. In this article, we will talk about the main changes that have been introduced by this Directive and draw attention to the expert opinion.
Cryptocurrency Funds
Although for the most part, the content of 5AMLD is an update to 4AMLD, the document is an important new step for cryptocurrencies. 5AMLD introduces the following measures:
- The document introduces a definition off virtual currencies, which in a general sense can be viewed as “a digital form of value that can be transferred, stored or sold digitally, and that can be accepted or exchanged”.
- Cryptocurrencies themselves and their exchanges are listed as “must-haves” subject to the same AML/CFT rules that govern all financial institutions. This includes the mandatory conduct of appropriate customer due diligence and reporting of suspicious activity.
- 5AMLD is more demanding and complete in terms of imposing reporting obligations, empowering financial intelligence units to obtain information on addresses and individuals holding cryptocurrencies, thereby countering cryptocurrency anonymity.
- 5AMLD implements regulations for cryptocurrency wallet providers, according to which they must register with the appropriate authorities at their location.
The introduction of such rules gives EU operators the opportunity to introduce an even larger number of cryptocurrency products and allows them to compete significantly with Asian countries that are more successful in the cryptocurrency market.
Prepaid bank cards
Under 4AMLD, the limit for currency transfers to anonymous prepaid bankcards per month has been reduced to 250 euros. This was done to combat investment in terrorist groups. 5AMLD has lowered this limit to 150 euros. The same limit is set for the amounts that can be stored on the card or the limit available for replenishing the card.
This means that companies will definitely have to check those entities that have exceeded the € 150 point when using prepaid bankcards. The limit for online transfers has been reduced to 50 euros.
Prepaid bankcards that were issued outside the EU are now banned from use if they were issued outside of those regions that comply with the provisions of legislation that would be equivalent to the EU on AML/CFT and KYC. Officials need to revise the methods of processing transactions on prepaid bank cards and introduce schemes for recognizing (rejecting) transactions when using cards issued outside the Union. In line with this requirement, existing systems and procedures can be significantly revised.
Christopher Baines, Chief Compliance Officer at Pockit, said: “The directive is definitely a step in the right direction: it reduces the opportunities for criminals.”
High Value Goods
The provisions of 5AMLD expanded the sphere of influence of the legislative framework in relation to other ways of storing value. For example, dealers who sell works of art or those who act as intermediaries now have AML/CFT reporting and reporting obligations. They must also maintain consumer due diligence procedures. The provisions of the directive distinguish works of art with special value, that is, from 10 thousand euros.
5AMLD’s influence is not limited to art. Transactions in goods such as oil, weapons, precious metals and tobacco products (or tobacco) are also considered high-risk transactions. Archaeological, historical and cultural artifacts also fall within the scope of this regulation. This is a step leading to targeted investment in the activities of terrorist associations such as ISIS.
Beneficial ownership
In one quarter of 2017, 4AMLD introduced an emphasis on ultimate beneficial ownership in order to mitigate risks and prevent illegal cash flows. 5AMLD proposes to apply the measures outlined below:
- Lists of UBO (which were formed based on 4AMLD) must be published within 1.5 years from the date on which 5AMLD came into force.
- Trusts (any structure of this sort) need to hold fast to the principles with respect to valuable possession and to give information to the specialists of the state mechanical assembly, just as to the individuals who show a real concern.
- National UBO records ought to be commonly connected at EU level, which will help encourage associations and information trade between countries-members of the Union.
- Member nations are needed to reinforce their strategies for approving UBO.
- Members are needed to utilize separate UBO registers devoted to banking accounts.
High-risk third countries
Under 5AMLD, associations that have partnership with high-hazard third countries need to utilize upgraded due ingenuity measures to lessen the dangers of cash dealing with those nations. The measures are as per the following:
- Companies ought to get information on clients and UBO, distinguishing the reason for future exchanges and the sources of budgetary flows to UBO.
- Firms need to share exchange subtleties with senior administration and get fitting endorsement.
- Organizations ought to reinforce their powers over specific associations, which may require more nitty-gritty investigation.
Influential political figures
In accordance with the provisions of 5AMLD, the member states of the Union must compile and publish a list of persons who have political influence. Lists of political figures rarely appear and therefore require an explanation of what they are. The list of persons that EU member states must form in accordance with 5AMLD will include people who have significant political influence. This list includes important political positions. Such lists are created for easier tracking of risks.
It can take a lot of administrative effort to update the lists. Joanna Jenkins, head of compliance at Railsbank, notes that since “differences in information can cause problems”, organizations must find a way to guarantee that consistence is at a fitting level.
Conclusion
We think that the Directive is a necessary and positive step to ensure greater transparency, security and predictability in various areas, despite the fact that the new requirements of the Directive create additional costs for a wide range of subjects. Our specialists will provide you with qualified advice on bringing your AML/CFT Policies into line with the new requirements.