Fifth Anti-Money Laundering Directive (5AMLD)

Background

In response to recent terrorist attacks in Europe, enhancements have been made to assist in the fight against terrorist financing and increase transparency in financial transactions. 5AMLD seeks to enhance the 4AMLD to align with modern trends and technologies and strengthen current rules regarding transparency and cooperation between financial supervisory authorities. It also provides for updated rules regarding Politically Exposed Persons (PEPs) and strengthens requirements for entities dealing with high risk third countries. 5AMLD came into force 9 July 2018 and had to be transposed into Member States’ national law by 10 January 2020.

Key Impacts

Beneficial Ownership

• Public Register
  Establishing a rule of public access: The 5AMLD requires that Member States allow access to beneficial ownership details on corporate and other entities in a coordinated manner. 5AMLD seeks to balance the need for a public register with confidentiality and data protection rules. The information available on the public register will therefore be specific and limited.
  
  
• Trusts
  Access to data on beneficial owners of trusts will be accessible without any restrictions to competent authorities, professional sectors subject to AML rules (e.g. lawyers and banks) and will be accessible to other persons who can demonstrate legitimate interest.
  
  
• Better Connection of the Beneficial Ownership Registers
  5AMLD requires the establishment of better verification mechanisms to ensure information on the registers is accurate. The national registers will be interconnected directly to facilitate cooperation and exchange of information between member states.
  
  

Politically Exposed Persons

Member States are now required to issue lists with the specific functions that qualify as prominent public functions, in order to ensure that persons who perform such activities will be identified and, if necessary, monitored.

Member States are also required to request such a list from international organisations accredited in their territories.

High-Risk Third Countries

5AMLD seeks to harmonise how Member States ensure that sectors dealing with countries that present deficiencies in anti-money laundering and terrorism regimes apply systematic enhanced controls. 5AMLD encourages Member States to limit their relationships with third countries that present weaknesses. The risky countries are not defined by the Commission, which will adopt the list of jurisdictions with strategic AML/CFT deficiencies provided by the Financial Action Task Force (FATF).

Information Sharing

5AMLD requires centralised data registries to be put in place at the national level that allow FIUs and competent authorities to identify account holders and controllers in a timely manner.

Virtual Currencies

5AMLD extends the scope of AML/CFT controls to virtual currencies and any virtual currency service providers. It aims to eliminate the anonymity associated with transactions in virtual currencies to prevent their fraudulent use.

Prepaid Cards

In order to prevent terrorist financing, 5AMLD lowers the threshold for general purpose anonymous prepaid cards to a maximum transaction amount of EUR 150 and for remote payment transactions to EUR 50.

Implementation Timeline

10 January 2020—EU Member States were required to transpose the 5AMLD into national law.

The United Kingdom transposed the 5AMLD into national law through the release of the Money Laundering and Terrorist Financing (Amendment) Regulations 2019, with further Brexit related amendments through the Money Laundering and Transfer of Funds (Information)(Amendment)(EU Exit) Regulations 2019 and The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020.

In Ireland, the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020 gives effect to provisions of the EU’s Fifth Money Laundering Directive.