The government has introduced the Fifth EU Money Laundering Directive (5MLD) into UK law as of last Friday 20th December. It was introduced as part of ‘The Money Laundering and Terrorist Financing (Amendment) Regulations 2019’ and will come into force on 10th January 2020.
This is an amendment to existing regulation, the ‘Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’, but has some fundamental new inclusions that everyone in financial services will need to take action on.
A key amendment to the regulation is new wording which says that wherever possible businesses must use electronic verification for their anti-money laundering checks rather than just looking at paper-based documents such as passports and driving licenses. The wording says:
“(19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where […]
(a) it is obtained by means of an electronic identification process, including by using electronic identification means or by using a trust service (within the meanings of those terms in Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23rd July 2014 on electronic identification and trust services for electronic transactions in the internal market(11)); and…
b) that process is secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity.”.
All firms in the financial services sector will need to implement these changes immediately. This means lenders, financial advisers and any third parties including accountants, solicitors and estate agents. Other sectors to now fall under the regulations include crypto-currency exchange platforms and letting agents, where the rent is €10,000 per month or more. Failure to comply with the regulations can result in prosecution and heavy financial penalties.
Martin Cheek, managing director of SmartSearch commented, “The Fifth Money Laundering Regulations coming into law may well catch a number of people by surprise, happening, as it has, so close to Christmas. It comes into effect on the 10th January, so companies will not have long to prepare.
“It is the need for electronic verification that is likely to take most people by surprise. Any lenders or IFAs who do not already have a trusted means of doing this will need to implement this immediately to ensure they are compliant and save themselves from a heavy fine.
“The regulations are designed to help tackle rising levels of fraud and eliminate money laundering, things that are likely to be a key priority for everyone this year.”
SmartSearch, the UK’s leading provider of electronic verification has provided a guide as to five of the key amendments to the regulations, which can be found on its website at: https://www.smartsearch.com/resources/blog/5-amendments-of-5th-anti-money-laundering-directive