It seems that Anti-Money Laundering (AML) directives are at bit like buses - you wait for ages and then you get three at once.
The third directive came into force in 2005 and then there was a long wait for number four which hit the statute books in 2017. We now have the fifth version which came into force in July 2018 and the sixth version which will be published shortly.
The fifth directive must be transposed into UK law by 20th January 2020 (as always, subject to any issues surrounding Brexit).
The fourth directive caused some confusion in the general insurance sector as it was unclear if any of it applied. The general insurance profession is not subject to the money laundering regulations, so the directive did not apply.
The fifth directive is more of a series of amendments to the structure of the fourth directive, adding various additional provisions that weren’t included in the text of 4AMLD. The main changes are focused on enhanced powers for direct access to information and increased transparency around beneficial ownership information and trusts. The fifth directive:
- extends the scope to virtual currency platforms and wallet providers, tax related services and traders of art
- grants access to the general public to beneficial ownership information of EU-based companies
- makes it an obligation to consult the beneficial ownership register when performing AML due diligence
- obliges member states to create a list of national public offices and functions that qualify as politically exposed (PEP)
- introduces strict, enhanced due diligence measures for financial flows from high-risk third countries
- ends the anonymity of bank and savings accounts, as well as safe deposit boxes and creates central access mechanisms to bank account and safe deposit boxes holder information throughout the EU
- makes information on real estate holders centrally available to public authorities
- lowers thresholds for identifying purchasers of prepaid cards and for the use of e-money
- further enhances the powers of the relevant authorities and facilitates cooperation and information exchange among those authorities.
The sixth directive will focus on criminal offences and penalties.
Key changes expected in the sixth directive include:
- defining all 22 predicate money laundering offences and harmonising the criminal nature of money laundering across the EU
- anti-money laundering training for staff on recognising all predicate offences
- aiding and attempting to commit money laundering will be an offence
- providing a comprehensive definition of money laundering
- imposing a minimum five-year prison sentence for serious offences
- extending criminal liability to legal persons
- aggravating circumstances can be applied for convictions relating to serious offences such as corruption and human trafficking
- a firm’s individual senior management may be personally liable for corporate crimes under new ‘failure to supervise’ offences
- penalties for money laundering offences could include prohibition from public welfare benefits, bans from conducting business or forced wind-up of businesses through which the offences were committed
At this stage, there is no specific commentary on how various sectors will be affected. Given the scope of the fifth directive and the fact that it is a series of updates to version four, there should be little for the general insurance broker to deal with.
The sixth directive is still in its early stage, and there may be some impact in other areas when this is published, such as the Proceeds of Crime Act and the Criminal Finances Act where we may see some harmonisation of definitions, sanction and penalties.
Whilst not immediately relevant to our general insurance clients, firms with IFA, mortgage or credit divisions may find this more useful.
