EU regulations are legal action that applies directly at the national level. Approval and enforcement of regulation at the EU level mean that it has become feasible within EU countries. EU regulators are constantly designing legislation to protect customers and businesses from illegal activities such as money laundering.
What Is The 5th Money Laundering Directive (5AMLD)?
Regulators have made improvements to help tackle terrorist financing and increase transparency in financial transactions. 5th Anti-Money Laundering Directive (5AMLD) seeks to harmonize 4AMLDs with modern trends and technologies and to strengthen existing rules on transparency and cooperation between financial authorities. 5AMLD is the latest published rule to deal with the current challenges of the European Union's AML / CFT ecosystem.
Some changes have occurred since 5AMLD came into force. For example, to ensure that systems such as regulating virtual currencies and prepaid cards to prevent terrorist financing, improving measures for financial transactions in high-risk countries, the national central banks, and payment account records are accessible in all member states. In the rest of our article, you can find five basic elements of the new Anti-Money Laundering (AML) legislation.
When setting a lower monthly threshold with 5AMLD, the previous monthly transaction limit was reduced to 250 €, this limit was reduced to 150 €, and the minimum value of anonymous transactions was changed to 50 €. Besides, the use of non-EU issued cards has been banned with 5AMLD.
Access to cryptocurrencies has increased with 5AMLD, and this industry has brought more transparency and trust. 5AMLD requirements also aim to create an environment where EU-based businesses can compete with companies in the Asian market by offering more crypto products.
Like in 4AMLD, 5AMLD focuses on improving its The Ultimate Beneficial Owner (UBO), making some improvements. To illustrate, the UBO aims to make the lists public, unite the UBO national registrations at the EU level, and strengthen the UBO validation mechanisms.
Politically Exposed Persons (PEPs)
5AMLD pays attention to people who are Politically Exposed Persons (PEP), so companies should open their PEP lists to the public and update them regularly. 5AMLD aims to help companies identify such high-risk customers.
5AMLD states that when a company interacts with a risky third country, it needs to Enhanced Due Diligence (EDD) to avoid hazards. Companies should define their UBOs and transaction objectives, and potential transactions should be reported in advance and approved, and also controls on business relationships should be increased and further investigated.
When member Countries fail to implement EU Regulations
EU regulations and decisions become automatically binding throughout the EU at the time they come into effect, and their directives should be included in their national legislation by EU countries. National authorities must ensure that these regulations are properly implemented. The Commission assists member states in the correct implementation of EU regulations and laws, providing solutions such as implementation plans and guidance documents. As a result, the Commission is responsible for ensuring that all EU countries correctly implement EU regulatıon and laws.
If national authorities cannot properly implement EU law, the Commission may initiate a formal violation procedure against that country. If national authorities still do not comply with the warnings, the Commission may decide to refer the matter to the Court of Justice and to offer fines. If the Court of Justice accepts the attitude of the Commission, it will determine the mass payment or the daily payment to be paid by the member state. As a result, member states that do not comply with EU regulations be punished. For instance, the US has imposed a value of $45.6 million in fines from January to April 2019. To give another example is that In 2019, Europe received 6.44 billion dollar AML fines for not complying with EU regulations such as 5AMLD.
17 EU countries not implementing 5AMLD
17 EU member states have not implemented these regulations since the 5AMLD regulations came into force. Since the European Commission (EC) did not fully transfer EU 5AMLD to national laws by 10 January 2020 deadline, sanctions are initiated against more than half of the EU member states.
Britain, Czech Republic, Belgium, Estonia, Greece, Ireland, Poland, Austria, and Luxembourg, received an official letter stating that they partially transferred 5AMLD in April 2020. The other nine countries have already received such letters because they have never followed the 5AMLD measures. The Netherlands, Portugal, Cyprus, Romania, Slovakia, Spain, Hungary, and Slovenia had received such letters by EC because they had not previously implemented the 5AMLD measures. Any state that does not respond satisfactorily to the letters of the EC within four months may encounter "reasoned opinions," the next phase of the EC process. After that, the issue goes to the Court of Justice, which can result in fines, but we can also point out that most problems are solved before this stage.