Finance Monthly May 2019 Edition

What is 5MLD and how is it different from previous anti-money laundering directives? 5MLD represents the latest update to the Anti- Money Laundering (AML) directives put out by the European Union (EU). Like those before it, its goal is to stay current and on top of changes in money laundering techniques that criminal actors have been adopting. Financial crime continues in whatever form is available to these bad actors, and regulators need to adapt to these changing circumstances with new updates. 5MLD is especially pressing, given the high-profile terrorist attacks in Paris and Brussels in 2015 and 2016 respectively. In both cases, terrorists used non-conventional techniques to finance their criminal activity, including the use of pre-paid cards, which under 4MLD was not adequately covered for potential money laundering abuse. The Panama Papers leak in early 2016 also highlighted the shadowy nature of how corporations can hide the true owners of shell companies that are used for illicit activities. Politically Exposed Person definition clarified There are several major updates that distinguish 5MLD from 4MLD, with the first clarifying the definition of a Politically Exposed Person (PEP). By virtue of their positions, PEPs are more susceptible to corruption, given their government role and influence. Corruption is a predicate crime to money laundering, and financial institutions have to conduct enhanced due diligence on their PEP customers due to this increased risk. Previously, there was no clear definition of a PEP – for example, while the Mayor of London is a PEP, what about the Lord Mayor? How about a Mayor of a small village in Spain? To achieve some level of consistency, The Fifth Money Laundering Directive (5MLD) has an implementationdateof January 2020, with the aimof addressing a number of weaknesses that have come to light since the introduction of the Fourth Money Laundering Directive (4MLD) on 26th June 2017. Here, encompass industry adviser Dr Henry Balani, a financial services expert and academic, examines the key developments within the latest directive and what they will mean. Dr Henry Balani - Industry adviser to encompass corporation EU’S FIFTH MONEY LAUNDERING DIRECTIVE: KEY DEVELOPMENTS & THEIR IMPACT 52 www.finance-monthly.com ASK THE EXPERT - MONEY LAUNDERING