The MLD5 came into force on 9 July 2018 but the deadline for bringing into force all laws, regulations and administrative provisions in order to comply with the Directive is today (10th January 2020).
Some of the key provisions the MLD5 covers are:
- Increasing the scope of anti-money laundering provisions to regulate virtual currency exchange platforms such as Bitcoin. Virtual currency exchange platforms will now be required to carry out customer due diligence (CDD) checks on new customers. Currently users of these services enjoy a degree of anonymity so there are concerns that these platforms are easy to abuse or use for terrorist financing.
- Streamlining and clarifying the enhanced due diligence measures for countries designated as ‘high-risk’ by the EU Commission. Firms dealing with these high-risk third countries must increase their monitoring of financial transactions, but unfortunately the MLD4 failed to specify how. MLD5 has now amended this by setting out a list of EDD measures firms are expected to take.
- Identification of holders and controllers of bank and payment accounts and safe-deposit boxes held by financial and credit institutions. Under MLD5 Member States must create an automated and centralised mechanism for identifying the holders of the above accounts. This central register must be searchable by relevant authorities and contain account holders’ names and those of their agents, beneficial owners, IBAN, and date of account opening and closing. The UK has until 10 September 2020 to implement such a system
The one we want to focus on though is below, as this has the most relevance for our industry as it effects the obligations of Trustees.
- Improved access to beneficial ownership information for firms. MLD4 introduced provisions to provide transparency regarding beneficial ownership information for legal entities and trusts. This introduced obligations to register information on beneficial ownership and dictated how this information could be stored and accessed. Trustees will be familiar with this in the context of the Trust Registration Service (TRS). Under MLD4 this register could only be accessed by HMRC and law enforcement. MLD5 has extended the scope of this by allowing the general public a right to access information contained in the trust register as long as they have a legitimate interest in the information, again for carrying out CDD.
Up until now trustees have had an obligation to register any trust that has a UK tax liability using the TRS. MLD5 now requires that all UK express trusts are registered, whether they are taxable or not. This obviously places a greater obligation on trustees. Further to that, non-resident trusts must be registered if they are taxable here (this is not a change), and now also if they form a business relationship here expected to last more than 12 months, or acquire real property in the UK.