The New Year brings The Fifth Money Laundering Directive
The Fifth Money Laundering Directive (5MLD) is due to come into force in the UK on 10th January 2020, making amendments to the Fourth Money Laundering Directive on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing.
HM Treasury closed their consultation on 10 June 2019 but the final version of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs) has yet to be published making it very late to prepare for the new requirements.
Firms should be aware of the main points in the draft MLRs, which have been listed below:
- Expanded scope:Certain tax advisors and providers engaged in exchange services between cryptoassets and flat currencies and custodian wallet providers will, for the first time, become subject to the MLRs.
- Customer due diligence:Additional identification and verification obligations, collection of proof of registration on beneficial ownership registers (where relevant) and, in certain cases, a requirement to refresh customer due diligence.
- Enhanced due diligence:A requirement for firms to apply enhanced due diligence to business relationships and transactions involving high-risk third countries. Obliged entities will need to obtain additional information on; the customer and beneficial owner(s), the intended nature of the business relationship, the source of funds and wealth of the customer and beneficial owner(s) and the reasons for the intended or performed transactions.
- Reporting discrepancies:A requirement for firms to report any discrepancies discovered between the beneficial ownership information available in the central registers and the beneficial ownership information available to them.
- Express Trusts:A requirement for UK express trusts and some non-EU express trusts to register with HMRC’s Trust Registration Service.
- Risk assessments:A potential requirement for financial sector entities to undertake risk assessments (and policies) prior to the use of new products, business practices and delivery mechanisms.
- Whistle-blowing protections: A requirement that certain protections be put in place for whistle-blowers within obliged entities.
Firms should begin reviewing their procedures and policies now against the draft requirements.
To read the HM Treasury Transposition of the Fifth Money Laundering Directive consultation, click here.