International efforts to tackle corruption are gaining momentum. The Fifth Anti‐Money Laundering Directive (5AMLD) is the latest step in a process driven by the intergovernmental Financial Action Task Force (FATF), and EU and UK lawmakers. Since 2017 we’ve had:
- The Fourth Anti‐Money Laundering Directive (4AMLD).
- The Money Laundering, Terrorist Financing and Transfer of Funds Regulations.
- Criminal Finances Act.
Principally, the regulations place a responsibility on businesses to monitor any business or individual they have a business relationship with.
What is 5AMLD?
5AMLD is a series of additional provisions that build on 4AMLD. Here are some of the key changes:
- Regulation of pre‐paid cards and virtual currencies.
- Improving safeguards for transactions with high‐risk countries.
- Ensuring there are centralised account registers and retrieval systems.
5AMLD has widened the scope of businesses that are directly affected: cryptocurrency exchanges, digital wallet providers, prepaid cards and gambling services must now follow the same rules as financial service providers. Letting agents and art dealers trading above €10,000 are included in the expanded directive.
To see a more detailed analysis of 5AMLD, take a look on the government website here.
What This Means for Your Business
5AMLD is a reminder that the government is getting hotter on anti‐money laundering; it’s seen as a key battleground in the war against crime and terror. This means punishments for non‐compliance will become more severe, so now is the time to get your house in order with anti‐money laundering compliance.
With three months to go until implementation of 5AMLD in the UK, we’ve prepared three quick steps your business can take to ensure it’s not being left exposed.
#1 Know Your Obligations
The wider scope of 5AMLD means certain businesses will become obligated to follow guidelines from 10th January 2020. Make it your business to find out exactly what your obligations are.
Take care to read the blueprint, as 5AMLD provides some important clarifications. For example, 4AMLD was explicitly applicable to external auditors, accountants and tax advisors. 5AMLD widens the remit to anyone providing material aid, assistance or advice on tax matters, ensuring any uncertified tax advisors are included in the rules.
Letting agents are brought under the scope of 5AMLD, so any agent facilitating rent transactions of €10,000 or more must comply, meaning they’re now required to perform customer due diligence on sellers and buyers, screen staff, conduct PEPs checks, appoint a Money Laundering Officer, train staff and maintain accurate records.
#2 Review Your Customer Onboarding Process
If you are in a sector specifically under the scope of 5AMLD, then it’s critical to review your onboarding process. Even if your sector isn’t explicitly listed, it is good practice to incorporate AML checks into your onboarding process if you are working on high‐ticket one‐off transactions (like
jewellers). This is also relevant when processing sales.
Onboarding usually involves using a third provider to run checks on directors, beneficial owners and persons with significant control. Red Flag Alert provides everything you need to meet compliance requirements quickly.
- Full range of risk level checking.
- Unbeatable match rates.
- Unbeatable match rates.
- Enhanced due diligence.
- Sanctions and PEPs real‐time screening.
- Monitoring alerts.
- Simple interface.
- Secure audit trail.
#3 Ensure Staff Are Trained Appropriately
Review how your business trains staff. All ‘relevant staff’ should be aware of anti‐money laundering laws, and means anyone in the course of their duties is capable of “contributing to the identification or mitigation of the risk of money laundering, or the prevention or detection of money laundering.”
Training should equip staff to recognise situations that may arise due to money laundering; this training can be face‐to‐face, online or via an external consultant.
All new starters should be trained, and refreshers should be every couple of years at least – for businesses at higher risk this should be more often. Training can be complimented with ongoing bulletins or information.
Don’t Wait – Put Processes in Place Now
Ignorance is not an excuse with money laundering.
For most small businesses, the steps required to meet obligations are relatively straightforward but should be implemented quickly. Directives are likely to get stricter and penalties more severe.
If you have a lot of customers, it will be hard to retrospectively track them all so get your policy in place now, so you have future‐proofed this compliance element of your business.