Cryptocurrency firms need to take immediate action as UK Government enshrines 5th Money Laundering Directive into UK law

The government has introduced the Fifth EU Money Laundering Directive (5MLD) into UK law just before Christmas on Friday 20th December.  It was introduced as part of ‘The Money Laundering and Terrorist Financing (Amendment) Regulations 2019’ and will come into force this Friday 10th January 2020. 

This is an amendment to existing regulation, the ‘Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’, but has some fundamental new inclusions that affected firms will need to take action on. Crucially, for the first time the regulations now explicitly cover cryptoassets.

A key amendment to the regulation is new wording which says that wherever possible businesses must use electronic verification for their anti-money laundering checks rather than just looking at paper-based documents such as passports and driving licenses.  The wording says: 

“(19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where […] 

(a) it is obtained by means of an electronic identification process, including by using electronic identification means or by using a trust service (within the meanings of those terms in Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23rd July 2014 on electronic identification and trust services for electronic transactions in the internal market(11)); and…  

  1. b) that process is secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity.”.

Cryptocurrency exchange platforms and all firms handling cryptocurrency will need to implement these changes immediately. This is in addition to lenders, financial advisers, accountants, solicitors and estate agents. Failure to comply with the regulations can result in prosecution and heavy financial penalties.

Martin Cheek, managing director of SmartSearch commented, “The Fifth Money Laundering Regulations coming into law may well catch a number of people by surprise, happening, as it has, so close to Christmas.  It comes into effect at the end of this week on the 10th January, so companies have to prepare now.

“It is the need for electronic verification that is likely to take most people by surprise. Any cryptocurrency exchange platforms that do not already have a trusted means of doing this will need to implement this immediately to ensure they are compliant and save themselves from a heavy fine. Estate agents, letting agents and cryptocurrency platforms need to be particularly aware as they now fall under the regulations where they didn’t before.

“The regulations are designed to help tackle rising levels of fraud and eliminate money laundering, things that are likely to be a key priority for everyone this year.”

SmartSearch, the UK’s leading provider of electronic verification has provided a guide as to five of the key amendments to the regulations, which can be found on its website at: https://www.smartsearch.com/resources/blog/5-amendments-of-5th-anti-money-laundering-directive  

For additional help and information on how the regulations will affect your business and what companies can do to ensure they are compliant, you can speak to an anti-money laundering specialist at SmartSearch who can help on: 0113 238 7660 or visit the website at: www.smartsearch.com  

Author: Yash Hirani

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