European Union came up with a fifth anti-money laundering directive in July 2018. According to the recent amendments in the directive, member states are supposed to modify regulations and make it part of international law with a deadline of January 2020. These changes are given for several industries that were not covered previously. All regulatory authorities are set for implementation of AMLD5 requiring the corresponding entities to tighten the reins for practicing AML compliance.
The reason behind changes in AMLD5 is the increasing money laundering, terrorist financing, and finance-related frauds. Panama paper leaks and financial crimes are the major reasons. In the EU, financial institutions found to be facilitating black money flow in the organizations. Also, EU regulatory authorities have highlighted crimes in the Fintech industry as a result of money laundering. Now, acknowledging this issue, authorities have set themselves up for serious measures to stop ill-gotten gains from converting into good money. There is a need for transparency and soundness in the financial system.
AMLD5 has expanded the scope of regulations to multiple other sectors. These include the legal sector, virtual currency service providers, real estate, art dealers and prepaid cards. Let’s shed the light on each category individually:
Legal professionals are supposed to collect the information from their customers and verify it thoroughly. As they provide enormous services to a highly scalable network and businesses, there is equally important to screen them through innovative means and assure that their business is not facilitating money laundering, terrorist financing or similar financial crimes. Their services include assets management, legal advice, and tax returns. Here, it is crucially important to find out that no bad money is transferred through your company as a source. Otherwise, regulatory authorities have the right to impose hefty fines and penalties on your business.
Similarly, real estate that facilitates property dealing with a number of customers should first screen them and their money. This is necessary to make sure that your clients are buying or selling property with legal money. Also, they should be verified against the teleosts of criminal records. For this, ensure AML Compliance as per advised by local regulators.
In KYC/AML regulations, prepaid card transactions are in the spotlight. The companies providing prepaid card services are required to undergo the digital identity verification process. Also, the prepaid cardholder is bound to place an amount of 150 EUR in cards that were previously with a threshold of 250 EUR. The online transaction is limited to 50 EUR. This is intended to eliminate money laundering activities via prepaid cards.
Cryptocurrency businesses providing services of money exchange and digital payment methods are required to perform AML screening for each onboarding customer. Verify the customers against a number of sanction lists and automate the process of identity authentication. Regular monitoring of transaction flow should be done to identify the money flow and suspicious activities happening in the transit.
Criminals convert embezzle funds into clean money by selling art products. They do this with high pricing. For art dealers, it is equally mandatory to authenticate customers with proper screening and make sure their services are not facilitating suspicious transactions. This can be done by monitoring the flow and by performing Customer Due Diligence (CDD) simultaneously.
In addition to this, member states have a duty to compile the registers having information on beneficial owners and their practices. This information should be updated to help to analyze the behaviors of owners and to figure out if they have complied with the regimes or not. AMLD5 focuses on the screening of customers through KYC/AML processes that ensure that no ba actor is using any business to undergo malicious tasks. The companies that fail to comply with the regulations of AMLD5 are in the threat of being fined heavily. AML screening software is available that identifies the entities in real-time while providing seamless customer experience. They verify the identity using national id cards, biometric verification or document verification and screen them through the list of exposed personalities and PEPs records.