MLD5 comes into force in all quarters

Chris Hamblin

10 January 2020

Tom Griffiths, an associate director at the compliance consultancy of Lysis Group, told Compliance Matters: "In June 2018 the European Commission criticised 20 member states who had not fully transposed the 4th Money Laundering Directive into domestic law more than a year after the deadline of June 2017. The EC took proceedings against many of these countries, which included Ireland, France, Malta and the Netherlands.

"Many of these countries citied the fact they would wait for the EU's 5th Money Laundering Directive to be transposed, so I don’t expect the commission to experience the same issues today as they did in 2017/18 as the majority of member states are well prepared."

The City law firm of Laven & Partners has summed up the five main innovations of the directive as follows.

1. Beneficial ownership

MLD5 obliges the financial sector to divulge more information to the authorities about beneficial ownership, especially the beneficial ownership of trusts. Banks and others who can demonstrate a legitimate interest may see the information, as can any member of the public without the need to demonstrate a legitimate interest. The aim of this is to make the "customer due diligence process" when doing business with countries on the list. They will have to obtain information on the sources of various funds and check people's backgrounds and companies'/trusts' beneficial ownership.

The aim of this change is to make EU countries take the same approach to financiers who deal with highly risky countries outside outside its borders. In short, it wants them to limit their relationships with cutomers in these countries.

5. Prepaid cards

The threshold for prepaid instruments (e-money and prepaid cards) subject to background checks has been lowered from €250 to €150.

* Laven Partners are available on +44 (0)20 7838 0010 or at info@lavenpartners.com