It has not even been a year since the EU 4th Money Laundering Directive (4MLD) came into force on the 26th June 2017, yet the European Council agreed on the 19th of April 2018 to adopt a new 5th Money Laundering Directive (5MLD). This new directive has been highly anticipated which led to many EU member states, including Ireland and France, deciding not to transpose the 4MLD into domestic law.
The proposed details of the 5MLD were initially presented to the commission in July 2017. The fact that the European Council has decided to adopt the recommendations so quickly (the initial details of the 4MLD where initially proposed following the recommendations made by FATF in 2012) highlights the deficiencies the 4MLD had in relation to technological advances and other mediums by which criminals laundered money.
The 5MLD was proposed following a wave of terrorist attacks across Europe, which were in part funded by criminals exploiting technological advances and the pseudo-anonymity associated to digital currencies and pre-paid cards. Under the 5MLD, the use of pre-paid cards will be limited, and the due diligence and monitoring associated to digital currencies will be increased.
The new measures contained within the 5MLD also look to improve transparency in relation to corporate ownership – an issue which has been widely known within the financial service industry but one which gained notoriety following the Panama Papers scandal. These additional measures will help strengthen the powers of European Financial Intelligence Units.
A statement released by the European Commission read “Fighting effectively against financial crime needs proper implementation of these rules”. European member states, which will include the UK, will have 18 months to implement the new changes introduced by 5MLD.
The full brunt of these new regulations will be felt by regulated financial services companies who will face regulatory and financial penalties if they are unable to implement and comply with the new requirements effectively.
The adoption of these changes is likely to be far easier for financial institutions in countries which have already implemented 4MLD, such as the UK. Regulated institutions domiciled in countries that are yet to formally adopt 4MLD are likely to face a greater amount of effort to comply with the new requirements of both directives by 2020.
Lysis has worked with a range of regulated financial institutions and estate agency business across Europe to successfully implement 4MLD. To discuss how we can help with 5MLD please email firstname.lastname@example.org.