20th December 2019
By Steve O’Neill, Managing Director of BTC – trusted partner of Leonard Curtis, providers of the Lifecycle network
With less than a month to go before the amended Fifth European Money Laundering Directive (5AMLD) comes into force in the UK and across the EU on the 10th January 2020, Lifecycle’s recent live webinar looked at what it will mean for accountants. It also raised some interesting questions from delegates. You can listen to it here, free of charge, if you’re a Lifecycle member.
Superseding 2017’s Money Laundering Regulations, the 5AMLD is the latest legislative attempt to tackle the problem of money laundering – and therefore reduce counter terrorist financing – which costs the UK economy alone £37 billion every year.
The 5AMLD is a tightening of the existing legislation and requires checks on businesses, including parent and subsidiary companies, shareholders, directors, and persons of significant control.
The changes – the biggest in 12 years – will greatly improve transparency and create a much more robust AML framework. Within it, UK accountants of all sizes and client bases will have a much greater role to play in helping to reduce tax fraud and it will be a criminal offence for failing to take note of the necessary legislation and the steps to tackle it.
So, what changes will be implemented and how can we best prepare ourselves for this strengthening of the UK regime? Here we take a look back over the webinar to recap.
Scope will be extended to new obliged entities
Under the amended Directive, scope has been expanded to include letting agents, tax advisers, crypto assets, and art intermediaries – such as galleries, dealers, auction houses – which will now be amongst those businesses required to conduct customer due diligence (CDD).
The threshold for customer due diligence on electronic money will be reduced
Electronic money – or e-money – is widely used for making payments and value transfers, often without bank account transactions. The 5AMLD reduces the threshold at which CDD must be applied, which means more checks will have to be undertaken on a greater number of transactions.
Ongoing customer due diligence will become a legal requirement
There will be a legal requirement for ongoing annual CDD under the 5AMLD. UK law will require obliged entities to contact clients to review information which is both relevant to the risk assessment for CDD purposes and relates to their beneficial ownership information.
Enhanced due diligence (EDD) will be extended
5AMLD extends the need for enhanced due diligence for those clients who are politically exposed persons (PEPs) – and who are believed to be involved in serious crime and non-suspect, as well as their family members and non-PEPs who are ‘associated with’ a suspect.
Clarification on PEPs has also been sought under the new 5AMLD and the Government has been tasked with publishing an ‘exhaustive’ list of the people and roles it considers as embodying a ‘prominent public function.’
Cryptocurrency will be subject to the same AML regulations as other financial institutions
The 5AMLD will make cryptocurrencies and cryptocurrency exchanges obliged entities, which means they’ll face the same AML regulations applied to financial institutions under previous legislation. This means that accountants will be legally obliged to perform client CDD and submit suspicious activity reports (SARs).
There will be a greater transparency of beneficial ownership
The 5AMLD will allow public access to Registers of Beneficial Ownership, even without having to demonstrate any kind of ‘legitimate interest’. Trusts will also be required to meet greater transparency obligations, including the beneficial ownership requirements.
Mechanisms to report discrepancies in beneficial ownership information will be introduced
We’re already required to obtain information on the identity of clients’ beneficial owners, but the 5AMLD will oblige EU member states to make information on them available on international public registers.
This will include details of their businesses, as well as trusts and holders of safe-deposit boxes. It must include information on those with a 25% stake or more in the company.
Greater accessibility, scope and detail of the trust registration service
Under the 5AMLD, access to data on beneficial owners of trusts will be accessible without any restrictions to competent authorities, professionals subject to AML rules and anyone else who can demonstrate a legitimate interest.
It will also require the registration of all UK express trusts – not only those with UK tax consequences – and will also bring into scope non-EU resident trusts which own UK land or property, or those which have a business relationship with an obliged entity in the UK. This will extend the number of registrable trusts from around 200,000 to as many as two million.
Allowing access to a national register of bank account ownership
The 5AMLD will provide a public national bank account register of beneficial ownership details on corporate and other entities.
Produced by all EU member states, each register will be linked, and authorities will be able to request information from an obliged entity, even when no SAR has been filed.
Extension of customer due diligence to pooled client accounts (PCAs)
The 5AMLD requires that CDD is extended to pooled client accounts and non-MLR regulated businesses.
You can access a recording of the webinar and the accompanying slides here if you are a Lifecycle member.
If you’re not yet a member then click here to sign up for free.
About the Lifecycle network
Lifecycle is a unique network for accountants – provided by Leonard Curtis.
It provides member accountants with a comprehensive range of specialist services – and the expert support required – to improve their client offering at every stage of a business’ lifecycle. From company formation to cessation and all stages in between.
Lifecycle is free to join and also offers members many additional benefits. These include access to competitively priced Professional Indemnity insurance cover, a regular programme of free training and education and discounts on products and services relevant to their business and clients’ needs.