The 5th Money Laundering Directive: mandating electronic verification

The 5th Money Laundering Directive: mandating electronic verification

The UK is one of the most targeted nations in the world for money launderers. Martin Cheek, MD of SmartSearch, says electronic verification, mandated by the 5th Money Laundering Directive where possible, is the answer

The 5th Money Laundering Directive: mandating electronic verification

Money laundering is a huge and increasing problem thanks to the ever more sophisticated methods employed by launderers to move their dirty cash.

In response, anti-money laundering (AML) law is constantly evolving, and successive legislative updates reflect the EU’s determination to keep pace.

Nine months ago – following the Panama Papers, Paris and Brussels terrorist attacks – the 5th Money Laundering Directive (MLD) made some important amendments in an attempt to counteract terrorist financing and increase the transparency of financial transactions.

The most significant of these changes was the stipulation that, wherever possible, electronic verification is used when undertaking customer Due Diligence (DD) and Know Your Customer (KYC) procedures.

And while regulated businesses have always been able to use electronic verification – either as an alternative to traditional documents such as passports, driving licences and utility bills, or supplementary to manual checks – the 5th MLD has now thrust RegTech into the spotlight.

Not all European countries have good electronic identification solutions available, but the UK – probably as a result of the fact our financial sector is one of the most targeted in the world by money launderers – has a long-standing acceptance of such methods of identification.

The UK leading the world

In fact, the UK leads Europe in terms of RegTech; half of the 60 European companies on the RegTech 100 list were from the UK.

Member states have until late 2019 to either amend their existing legislation, or create new laws, to bring the 5th MLD into force. For the UK, this means the Government will either need to amend the 2017 money laundering regulations – which came into force last year – or create a whole new piece of legislation.

While the 5th MLD stipulates that electronic identification should be used wherever possible, it is widely believed that by 2020, electronic verification will become mandatory. It is therefore prudent for all regulated firms to look at electronic solutions now in preparation for the inevitable.

SmartSearch can provide a one-stop shop for electronic verification checks – PEP, KYC and sanctions -giving accountants the peace of mind that they are meeting all their money laundering regulations.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

1m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

2m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

3m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

3m

Related Articles

Fastest growing businesses more likely to be tech driven

Technology Fastest growing businesses more likely to be tech driven

14h Tom Lemmon
Lack of diversity and social mobility puts young talent off jobs and costs economy £270bn a year

People In Business Lack of diversity and social mobility puts young talent off jobs and costs economy £270bn a year

20h Tom Lemmon
Restaurants and takeaways make up a quarter of HMRC's named and shamed tax defaulters

HMRC Restaurants and takeaways make up a quarter of HMRC's named and shamed tax defaulters

22h Beth McLoughlin, Managing Editor
Chatbots and the AI-assisted audit revolution

Accounting Software Chatbots and the AI-assisted audit revolution

4d Tim Deeson, CEO & Founder GreenShoot Labs
Streamline your payroll processes with the Sage 50cloud Payroll Bureau and Sage Online Bureau

Technology Streamline your payroll processes with the Sage 50cloud Payroll Bureau and Sage Online Bureau

4d Sage | Sponsored
UK professionals reluctant to use company mental health support

People In Business UK professionals reluctant to use company mental health support

4d Tom Lemmon
Brexit uncertainty requires businesses to review commercial contracts

Brexit & Economy Brexit uncertainty requires businesses to review commercial contracts

4d Lindsay Ellis
This return does not compute – 2018-19 exclusions

Tax This return does not compute – 2018-19 exclusions

5d Helen Thornley, ATT Technical Officer