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
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.
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.