Fifth Money Laundering Directive—what’s changing—law firms?
Fifth Money Laundering Directive—what’s changing—law firms?

The following Practice Compliance guidance note provides comprehensive and up to date legal information covering:

  • Fifth Money Laundering Directive—what’s changing—law firms?
  • Background
  • Key changes
  • High-risk third countries and super-enhanced CDD
  • CDD
  • Beneficial ownership registers
  • Politically exposed persons
  • Defining trusts and similar arrangements
  • Other changes
  • Enforcement
  • more

The Fourth Money Laundering Directive (4MLD), replacing the Third Directive which had been in force since 2005, was transposed across Europe in June 2017. A mere 13 months later, in July 2018, the Fifth Money Laundering Directive (5MLD) came into force.

It is an ‘Amending Directive’ because it amends 4MLD. The UK government has confirmed its commitment to implementing the requirements of 5MLD; indeed it may be obliged to do so during any post-Brexit transition period. Incorporating all the changes introduced by 5MLD will involve the UK government making changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), SI 2017/692.

This Practice Note sets out the background to the Fifth Money Laundering Directive (5MLD) and the key changes it introduces. It provides details on timing and discusses future developments. It is intended for use by law firms.

Background

Money laundering and terrorist financing present fast-moving, ever-evolving and unpredictable risks. The nature of those risks changed so significantly during the course of negotiations on and implementation period for 4MLD that 5MLD was already on the table before the ink had dried on 4MLD.

Lots happened in that very short space of time:

  1. the Panama Papers revealed the widespread use of trusts and offshore structures to launder money generated from bribery, corruption and tax evasion

  2. the