Shearman & Sterling LLP | FinReg | EU's Fifth Money Laundering Directive to Enter into Force July 2018
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  • EU's Fifth Money Laundering Directive to Enter into Force July 2018

    The Fifth Money Laundering Directive has been published in the Official Journal of the European Union and will enter into force on July 9, 2018. Member States must transpose the directive into their national laws within 18 months of that date. 5MLD makes a number of changes to the European Anti-Money Laundering and Counter-Terrorist Financing regime set out in the Fourth Money Laundering Directive.

    The key changes introduced by 5MLD are:

    1. Extending the scope of "obliged entities" to include providers of exchange services between virtual and fiat currencies as well as custodian wallet providers. These entities will need to register in their home Member State.

    2. Harmonizing the application of enhanced customer due diligence for third countries that are determined by the European Commission to be high risk countries. Member States will be able to apply additional measures, where appropriate.

    3. Reducing the thresholds under which obliged entities are exempt from applying certain CDD measures to prepaid cards. The customer in a remote payment transaction exceeding EUR 50 will need to be identified. In addition, the use of anonymous prepaid cards issued outside the EU will only be permitted where the cards comply with requirements equivalent to EU laws.

    4. Enhancing the powers of and cooperation between Financial Intelligence Units, including giving them access to information and the ability to exchange it without impediments. This will include access to information on all types of virtual currencies, not only those that are serviced by providers of exchange services and custodian wallet providers.

    5. Requiring Member States to maintain lists of specific functions that qualify as prominent public functions to assist in the identification of politically exposed persons.

    6. Enhancing access to information on beneficial ownership across the EU and improving transparency in the ownership of companies and trusts.

    5MLD is drafted as a minimum-harmonizing directive, which means EU Member States can apply more stringent requirements if they consider it necessary.

    View the Directive (EU) 2018/843.

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