On the 10th of January 2020 the 5th Anti Money Laundering Directive (5AMLD) came into force in all European countries and is part of the Union’s efforts to strengthen anti-money laundering (AML) regulations and counter terrorism financing (CTF) and financial crime.
The 5AMLD aims to improve the existing AML framework across Europe by increasing transparency across the financial system and addressing issues related to financial transactions and beneficial ownership.
In addition to addressing the issue of anonymity, pre-paid cards and digital/crypto currencies, the new regulatory framework has expanded the entities required to comply with the provisions of the 5AMLD and the obligation to perform proper and consistent customer due diligence and report suspicious activity to competent authorities.
The so-called obliged entities have been expanded beyond the traditional banking and financial institutions to include professionals that enter into financial transactions with businesses and individuals like accountants, lawyers, tax consultants, insurance consultants, trust providers, real estate agents and art dealers.
Other key changes include the setting up of publicly available and interconnected registers for beneficial owners, the enhancement of powers of European Financial Intelligence Units, stricter criteria for assessing high-risk third countries and the safeguards for financial transactions with such countries and the cooperation between anti-money laundering supervisors and the European Central Bank (ECB).
The European Union considers the role of what it calls “gatekeepers (banks and other obliged entities)”, essential in its efforts to prevent money laundering and combat terrorist financing.
What the 5AMLD means to “obliged entities”:
The responsibilities of “obliged entities” are well depicted by Yves Mersch, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, on his speech on anti-money laundering on 15/11/2019, in which he stated, “Important as this debate is, let’s not forget the responsibilities that supervised entities already have: to put in place and maintain internal systems and controls to ensure that they properly manage the risks to which they are exposed”.
The increasing European and global move against money laundering and a more transparent financial and banking system, will increase the pressure from regulators and result in more, better and stricter regulations. In Europe, this will be reinforced through the EU wide cooperation between national anti-money laundering supervisors and the ECB that will set new expectations and raise the bar for dealing with money laundering issues.
What is the cost of non compliance?:
According the Association of Certified Financial Crime Specialists, “More than $8 billion in AML fines handed out in 2019, with USA and UK leading the charge” (https://www.acfcs.org/fincrime-briefing-aml-fines-in-2019-breach-8-billion-treasury-official-pleads-guilty-to-leaking-2020-crypto-compliance-outlook-and-more/).
This high cost of non-compliance, which may vary from financial fines to bad corporate reputation, is gradually expanding beyond banking and financial institutions to other “obliged entities”.
In the United Kingdom, the HM Revenue & Customs has fined an estate agent group £215.000 for money laundering failures (https://www.bbc.com/news/business-47441554) with the agency’s Economic Secretary stating that “I have zero tolerance for firms prepared to turn a blind eye to the law”.
In Ireland, the insurance regulator has fined an Italian life insurer operating across Europe, €1m for failures in its anti-money laundering and terrorist financing practices (https://international-adviser.com/life-insurer-fined-e1m-laundering-failures/).
How can we help
LT Synergy (www.ltsynergy.eu), an advisory firm specialized in the areas of governance, risk and compliance (GRC), in collaboration with its global partner Arctic Intelligence (www.arctic-intelligence.com), can support your preparation for the changes imposed by the 5AMLD, comply with its requirements and avoid the negative consequences of non-compliance.
Our partnership with Arctic Intelligence complements our offered services and other international alliances in the area of regulatory compliance and anti-money laundering, and enables us to focus on the compliance needs of companies beyond the banking and financial sectors, such as accounting, law, fiduciaries and insurance firms.
Our services, combined with the advanced functionality of the “AML Accelerate” platform, can support your organization, regardless of its size and industry undertake a detailed gap analysis, identify areas of AML risk and non-compliance with specific requirements of the 5AMLD, develop action plans leading to full compliance, promote a culture of compliance and prove to regulators that compliance is among your top priorities.
The “AML Accelerate” platform is tailored to 30 different industry sectors and trusted by prestigious organizations around the world in 12 different jurisdictions including the United States and Europe.
Contact us to find out more on how we can help you prepare and accelerate your compliance.
LT Synergy Ltd
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LT Synergy is a representative of Arctic Intelligence and promotes its services across Europe.