With the authorization of the Fourth European Union Anti-Money Laundering Directive (4AMLD) back in 2015, associated bodies within the scope seem to have been subjected to numerous changes in regulations. These changes were caused by the proposal of further amendments to the 4AMLD back in 2016.
Also, there has been a number of flaws in the AML/CFT regime of the European Union that have been revealed since the 4AMLD was enacted in June of 2017. However, with the Fifth Anti-Money Laundering Directive (5AMLD) coming into force in 2020, these weaknesses will be addressed.
The impact of the 5AMLD will be extensive; in this article, we will have a look at the significant impacts of this regulation.
The Inclusion of Virtual Currencies into the Scope
When the 4AMLD was enacted, the regulation defined the bodies involved as trust providers, letting/estate agents, lawyers, tax advisors, accountants, and financial institutions. However, the 5AMLD further broadens the scope to include anonymous prepaid cards, virtual currencies and digital currencies like wallet services and bitcoin exchanges.
With the 5AMLD regulation, virtual currencies are better defined under EU law. Plus, the requirement to accept this definition legally in the AML legislation is also included in all member states.
Tackling the Problem of Anonymity with Prepaid Cards
One of the updates that come with the 5AMLD regulation is in association with the issue of anonymity with the use of prepaid cards as a payment mechanism. As a result, EU member states have to verify the customer when a remote payment transaction above EUR 50 is done.
Interestingly, 36 months after the 5AMLD gets enforced; every remote payment transaction will have to apply identification.
Required Beneficial Ownership Registers
A major change brought by the 4AMLD was the need for beneficial ownership registers. As a result of this requirement, member states needed to hold and obtain current, accurate, and adequate information on all corporate and legal entities.
However, the 5AMLD regulation brings further clarification on the timing and requirement for the execution of such registers.
Within 18 months of the implementation of the 5AMLD, all member states must comply with the register requirement.
Enhancement of Information Sharing and Cooperation of Financial Intelligence Units
To ensure the simplification and improvement of information access to the identity of payment accounts and holders of banks, the 5AMLD makes it mandatory for member states to implement centralized and automated mechanisms. These mechanisms will be placed at national level in identifying bank accounts and payment accounts by a credit institution. Hence, a central source is developed for identifying individual bank accounts.
To Wrap It Up
The modifications that come with the 5AMLD are proposed with the primary goal of developing a harmonized and consistent approach towards the mitigation of TF and ML within financial systems across every EU member states.
Additionally, these proposed amendments are placed towards the alignment of EU’s CTF and AML laws to the recommendations of FATF AML. Hence, the 5AMLD emphasizes a move towards the global annihilation of financial crime.