In response to terrorist events in Europe, further amendments have come into effect from 10th January 2020 to anti-money laundering (AML) legislation. The aim of the 5th EU AML directive is to close down the financial means of criminals without preventing the functioning of payment systems and markets. Importantly, the changes bring letting agents, art dealers and crypto currencies into scope of the legislation.
Electronic ID verification
The new directive also allows for use of electronic ID verification, where it can be considered as a reliable source of evidence, where the electronic process is free from fraud and provides sufficient assurance of the identity of the individual.
Tighter transaction monitoring
The new directive also focuses on tighter transaction monitoring requirements, shifting the focus from complex ‘and’ unusually large transactions to complex ‘or’ unusually large transactions. This is significant, requiring firms to at the very least review and amend their transaction monitoring systems’ parameters settings.
Deeper KYC investigation
In addition to tighter transaction monitoring, the new directive also places greater emphasis on know-your-client (KYC) processes. In particular, if organisations are unable to identify the beneficial owner of a company, the organisation must take reasonable measures to verify the identity of the senior managing official in the company. Often, this may not be publicly available information and thus will require additional time and efforts to obtain and verify this information.
Additional risk factors
Enhanced due diligence is required for additional risk factors including golden visa applicants, dealing with a client non face-to-face without reliable electronic CDD, transaction risks including oil, arms, precious metals, tobacco, ivory and protected species. Essentially, the new directive requires the organisation’s policies to be amended to ensure that when new products, business practices or technology are adopted, the firm assesses and mitigates the money laundering and terrorist financing risks of these.
Further amendments are due to come into force later this year, namely concerning:
- Customer due diligence: anonymous prepaid cards comes into force on 10th July 2020
- Bank account portal come into force on 10th September 2020