Incidents such as human trafficking, terrorism, and the Middle East migration crisis since complying with the EU 4th Anti-Money Laundering Directive have revealed the necessity of new measures to anti-money laundering and financing terrorism.
Toward all of them, the European Parliament complies with the 5th EU Anti-Money Laundering Directive on 19 April 2018. The changes were aimed to find out the criminal financial activities and terrorist financing.
Understanding 5th EU Anti-Money Laundering Directive
Since complying with the EU 4th Anti-Money Laundering Directive, incidents such as human trafficking, terrorism, and the Middle East migration crisis have revealed the need for new measures to combat money laundering and terrorist financing.
In line with new regulations, developing technology and trends, legal regulations for financial activities, corporate, and other legal entities had to be clear and more understandable. This explicitly would make it easier to improve the current preventive framework and combat terrorist financing.
5AMLD aimed to detect money laundering and prevent it. In this context, stricter rules have been introduced to fight money laundering and terrorist financing effectively. Besides, the number of organizations also obliged to comply with AML Regulations has been increased.
What Are The 5AMLD Regulations?
Cryptocurrency
With technology development, virtual money took its place in the economic cycle. Although 5th AMLD was designed to improve 4th AMLD, some additions needed to be made. The main measures taken against crypto assets under 5AMLD are as follows:
- 5AMLD creates a legal definition for cryptocurrency.
- Cryptocurrencies are obliged to comply with the AML Regulations applied to financial institutions accepted as 'compulsory institutions' under 4AMLD. Because cryptocurrencies and crypto exchanges are also considered 'mandatory organizations.'
- Institutions that operate crypto money are also obliged to practice Customer Due Diligence (CDD) and send Suspicious Activity Report (SAR) like other organizations.
- Under 5AMLD, Financial Intelligence Units (FIU) have the authority to obtain the owners of the virtual currency's addresses and identities.
- Cryptocurrency exchanges and wallets are obliged to be registered with the competent authorities in their local location. As an example of these authorities, The UK's Financial Conduct Authority.
Prepaid Cards
Anonymous prepaid cards are one of the factors that facilitate money laundering and terrorist financing activities. Through prepaid cards, criminals can access substantial amounts of money. 5AMLD requires the implementation of customer due diligence measures. It also introduced a limitation for payment instruments monthly.
Check out our content to better Understand the Risk of Money Laundering on a Prepaid Card.
Legislation Regulations
With 5AMLD, obligations for financial crimes and tax evasion become clearer than previous legislation. Also, legislation reviews of the member states were expanded. Other decisions taken to broaden the scope of legislation are:
- To ensure public access to the useful property information. Thus, institutions and organizations can be controlled more by civil society. 5AMLD aimed to ensure financial integrity and confidence in this decision.
- Commercial and other legal entities can assist with legal regulations and investigations to fight against money laundering and terrorist financing.