The UK’s Implementation of the EU’s 5th Money Laundering Directive

30 January 2020
By Simon Witney (Special Counsel), Andrew Lee (Associate) and Andrew Burnett (Trainee)

On 10 January 2020, The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force in the UK. These Regulations amend the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and implement the EU’s 5th Money Laundering Directive (MLD5) into UK law.

MLD5 was designed to improve transparency and create an “environment hostile to criminals seeking shelter for their finances through non-transparent structures”. The most notable non-transparent structures that MLD5 targets are “virtual currency” structures, particularly  "providers engaged in exchange services between cryptoassets and flat currencies" and those who provide "services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies” (i.e. custodian wallet providers). Firms providing these services will now have to comply with a range of anti-money laundering obligations, including preparing anti-money laundering and terrorist financing risk assessments.

However, another important change applies to any firms carrying out customer due diligence obligations (so-called “Obliged Entities”). In the UK, companies already have an obligation to disclose the names of any individual who controls more than 25% of their shares or voting rights on a public register: the Persons of Significant Control register (or PSC Register). Pursuant to the new UK Regulations, if – during due diligence on a client – an Obliged Entity discovers any discrepancies between the information it receives and the beneficial ownership information found on the PSC Register, it is required to report that discrepancy to Companies House. UK-based firms will need to update their procedures accordingly.