On 15 April 2019, HM Treasury published its consultation on the steps the UK Government proposes to take to meet the UK’s expected obligation to transpose the Fifth Anti-Money Laundering Directive (5MLD) into national law.
The 5MLD makes a number of changes to the Fourth Anti-Money Laundering Directive which was mentioned in our update last year (see here).
In implementing the 5MLD, the UK Government is catering for the scenario where an implementation period is in place after the UK leaves the EU. The UK played a significant role in the negotiation of 5MLD and shares the objectives which it seeks to achieve on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
Points to note in the HM Treasury consultation include:
- 5MLD defines cryptoasset exchanges as “providers engaged in exchange services between cryptoassets and fiat currencies”. However, HM Treasury is also consulting on regulating providers engaged in alternative exchange services, in addition to purely fiat-to-crypto exchange;
- HM Treasury is seeking views on whether the 5MLD definition of “virtual currencies” encompasses all types of cryptoassets identified by the Cryptoassets Taskforce (our blog is here), or whether this definition may need to be amended;
- amending Regulation 28(3)(b) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to bring them into line with the Financial Action Task Force (FATF) standards. Regulation 28(3)(b) currently states that relevant persons must, where a customer is a body corporate, take ‘reasonable measures’ to determine and verify the law to which a body corporate is subject, its constitution and the full names of the board of directors and the senior persons responsible for the operations of the body corporate. The FATF standards (Recommendation 10.9) go further than this, recommending relevant persons be required to determine and verify this information;
- Article 18a(1) of the 5MLD provides the UK with the option to impose an additional requirement. This would require obliged entities to ensure that whenever a customer makes their first payment involving a designated high-risk third country, that payment is carried out through an account in the customer’s name with a credit institution subject to the 5MLD’s customer due diligence standards. The UK will not transpose this optional requirement; and
- HM Treasury does not expect to specify a full list of types of express trust within the legislation transposing 5MLD, given the very wide range of ways in which trusts are used. Instead, the onus will be on trustees and their agents to determine whether their trust is an express trust or not. HM Treasury has set out examples of the categories of UK trusts that are likely to fall within the definition of an express trust.
The consultation closes on 10 June 2019.