New anti money laundering legislation has arrived and firms will have to move very quickly in order to comply if they have not already. Those that do not, will be unable to plead ignorance. Even so, many are lagging.
On 10th January, the Government introduced its Fifth EU Anti-Money Laundering Directive (AMLD5). It’s an update of existing legislation so it doesn’t involve a massive overhaul but firms still need to take immediate action to ensure they are compliant.
The new regulation will enhance the powers of the EU financial intelligence units and increase transparency around company trust and ownership using beneficial benefit ownership registers. It will also prevent risks associated with the use of virtual currencies for financing terrorism and enhance access to information for financial intelligence units.
Specific and complete identification of real holders of passbooks, bank accounts or e-wallets must be provided. Until now, they could be anonymous. The required subjects list has been expanded, particularly taking us into the realm of digital currencies. The registration processes of holders and trusts will also be expanded.
With the new regulation coming so quickly after Christmas there isn’t much time to get ready and it’s easy to see how some companies might get caught out. Of all the changes, it’s the requirement for electronic documentation, where possible, which might cause the most problems.
The legislation states:
“(19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where […]
(a) it is obtained by means of an electronic identification process, including by using electronic identification means or by using a trust service (within the meanings of those terms in Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23rd July 2014 on electronic identification and trust services for electronic transactions in the internal market(11)); and…
If you do not have a reliable way of obtaining documentation which meets these standards, you’ll have to develop it quickly. “
When deciding on due diligence, firms will have to consider a number of risk factors, such as transactions from high-risk countries, if the customer is the beneficiary of a life insurance policy, a national of a third country seeking residence rights or if businesses relationships are not face to face. If a transaction is related to oil, arms, precious metals or tobacco products they will also have to take more care.
To cope with these new demands, firms will have to enhance their due diligence checks and install AML training for all staff. You’ll also have to use electronic verification wherever possible, although paper-based checks may still be available in some circumstances such as if they have been provided by the client from electronic sources. While the changes to AML5 are far from exhaustive, they do require a significant adjustment, some which are all too easy to overlook.