The Fifth European Union (EU) Anti-Money Laundering (AML) Directive (5AMLD) which entered into force on the 9 of July 2018, must be implemented by the EU member states by January 2020. Firms affected by the new Directive, obliged entities, face new challenges resulting from the relevant amendments to the Fourth EU AML Directive (4AMLD) of 2015 (implemented in 2017).
Significant regulatory developments concern enhanced due diligence requirements in the areas of high-risk third countries, the establishment of ownership information, transparency of funds, and the scrutiny of political exposed persons. Essentially, the 5AMLD further raises the benchmarks for the practice of EDD on high-risk customers.
The discussion about the controversial list of high-risk countries has provided financial institutions and other obliged companies with ample information about countries of concern, information to be considered when conducting due diligence on customers linked to these countries. Moreover, accepting a business relationship without knowing the ultimate beneficial owner and without knowing the source of funds entails serious risks of being associated with criminals and their illegal proceeds. EDD should reckon with layered ownership structures and intermediaries involved in the flow of funds. Similarly, the identification of a PEP’s hidden involvement in ownership and transactions requires in-depth knowledge of a customer’s political and business environment.
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