Busy season about to get busier, as 5MLD kicks in

4th Dec 2019
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New rules on Anti-Money Laundering are about to come into force in January. But what does it mean? Here, Keytime AML Product Specialist, Steve Murray, looks at what 5MLD means for accountants.

Money laundering comes at a huge cost to the UK. Estimates are that serious organised crime enabled by money laundering costs the UK £37 billion every year and £90 billion is illegally laundered through Companies House registered shell firms. The scale is staggering, and it is little wonder that crackdowns are being made. Another issue is the increasingly digital nature of money laundering, including through virtual currencies.

If January isn’t already a manic enough time for accountants, it’s about to get a whole lot busier, thanks to the Fifth Money Laundering Directive – known as 5MLD – coming into force on Friday 10 January. A New Year’s Resolution for all practitioners must be to ensure that staff are familiarised, trained up and a plan is in place to adhere to the changes 5MLD will bring.

The first step is to understand the elements covered by the extension. It then follows that adequate client risk assessments are put in place, or procedures are tightened. Getting the right software in place to aid checks and ensure you are compliant is also a must.

By now, most practitioners will be well acquainted with the extension to the anti-money laundering (AML) regulations, but for those of you who would like a helping hand, I have summarised a few key changes:

  • Extension of obliged entries: the scope has been expanded to cover tax advisors and letting/estate agents handling €10,000 monthly rent. Art intermediaries, galleries and auction houses with transactions of €10,000 upwards are also included. Crypto assets, such as Bitcoin, will have stiffer requirements, given their prevalence within criminal activity.
  • Enhanced due diligence: this focuses on high-risk countries, the list of which will be expanded to cover those with an increased risk of money laundering. Additional checks are required to assess sources of wealth, overseas transactions and businesses owned abroad.
  • Trust registration service: 5MLD expands the scope of the Trust Registration Service, requiring trustees or accountants to register those trusts with the TRS, this includes Discretionary, Interest in Possession, Charitable, Employee Ownership and Bare Trusts.
  • Beneficial ownership: this required obliged entities to verify the identities of customers or beneficial owners. When an obliged entity goes into a new business relationship with a company or trust that meets the requirements, they must collect proof of registration.
  • Bank accounts: the UK will need to establish an electronic data retrieval service that lists legal owners of all bank accounts, safe deposit accounts and payment accounts held by financial institutions.
  • Supervisory bodies: accountancy trade bodies will be asked to produce annual reports of AML activities. A report from the Office for Professional Body Anti-Money Laundering Supervision showed that trade associations are failing to supervise or enforce AML. Read more about that here.

Further reading

A solution available to IRIS customers, including Keytime and PTP customers, is a tool offered by IRIS that ensures UK anti-money laundering compliance, which is simple-to-use and cost-effective. IRIS AML helps you to manage and document AML requirements, including fully integrated electronic ID and sanctions/PEP checks, and implement a risk-based assessment scheme. The software also streamlines the client onboarding process, minimises compliance costs for practices and assists with staff training. Find out more here.

Having the right reviews, policies, processes and software in place is critical, so too is asking the right questions, being thorough in your risk assessments, keeping up to date with legislation and proving you have the knowledge. New Year isn’t far away, especially given the festive distractions and the Christmas break, so it’s better to know what you need to do sooner rather than later. If you want to read up on 5MLD in more detail, take a look at the consultation document for the Fifth Money Laundering Directive here.

If you would like to find out more about IRIS AML, you can call 0844 815 5555 or visit IRIS.co.uk/AML for more information.