All you need to know about the 5AMLD: A brief overview

What can we expect from 5AMLD? Last year the 5^th AMLD was officially published in the EU journal after making modifications to the 4^th directive which was released in 2015. 5AMLD comes into force on the 10^th of January, 2020. This directive mandates for some significant changes with respect to risk based approaches in anti-money laundering and eliminating automated exclusions from due diligence practices. This directive is not as vast as the previous one and is more of an addition of provisions and amendments to the earlier framework of the directive. Some of the main changes the directive will be focussing on are:

• Protection will be provided to transactions from risky jurisdictions with the help of enhanced due diligence. An advanced form of verification and scrutiny for the sources these funds flow in from electronically will be executed in order to create a space for trustworthy source of funds from high risk third countries.

• Reducing spending limits on pre-paid cards and implementing a customer verification system by creating a restraint amount especially for anonymous cards issued in high risk countries. Lowering the thresholds and implementing restrictions on e-money and prepaid cards is a great way to combat financial crimes and malpractices.

• Registers of beneficial ownership was introduced and set in motion in the 4^th directive. 5AMLD  grants access to the general public to beneficial ownership information and records of companies based in the European Union to prevent fraudulent practices. They are also expected to consult the beneficial ownership registry while performing AML due diligence.

• Regulation of virtual currencies and wallet providers by providing them with clear and legal definitions and recognising them as regulated entities. The welcoming approach towards virtual currencies is a refreshing change and will prevent criminals from laundering money using them.

• This directive also administers creation of a streamlined banking system which should be easier to access in all member states in order to create a centralised system of data. There is also more safety and anonymity provided to whistle-blowers who report money laundering or financial crime activities.

This was an overview of some of the important changes and reforms made in 5AMLD. It touches upon a lot of the shortcomings that were brought to notice and identified in the 4AMLD by introducing and promising solutions for these issues in order to protect people’s data and finances which ensure a certain level of compliance. This directive promises more transparency and enhanced due diligence and the impact of this is hopefully going to be momentous and widespread.

Please note that all opinions made on this blog should be treated as a guide and not legal advice.