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Preparing for 5MLD

The ICAEW have issued an update regarding the EU’s Fifth Money Laundering Directive (“5MLD”), which states:

“HM Treasury is currently revising MLR17 to take account of the changes required by 5MLD, the directive must be transposed by 10 January.  Note that it will not be possible for this to be finalised and published until the next Government is in place.  At the same time, CCAB are working on updating the AML Guidance for the Accountancy Sector.

Many of the changes under 5MLD do not affect accountancy firms – as the changes include bringing letting agents, art dealers and crypto currencies into scope.  However, there are a few key areas that firms will need to address in their policies and procedures:

  • Firms providing both direct and indirect tax advice are now captured by the rules (e.g., repayment agents who act in the course of business as tax advisers, often referred to as High Volume Repayment Agents);
  • When you take on a client, you must check that the client has filed details of the Persons with Significant Control with the registrar (i.e., Companies House) and report any discrepancies you identify; and
  • Confirmation that electronic ID verification can be considered as a reliable source of evidence, where the electronic process is free from fraud and provides sufficient assurance of the identity of the individual.”

Whilst the use of electronic ID verification services have become commonplace in recent years, it is understood that certain providers of such services are sending correspondence to accountancy firms indicating that electronic ID verification will become mandatory from 10 January 2020 ~ whilst this may be utilised, it will not be a legal requirement that client due diligence is performed in this way.

Provided the UK is still a member of the EU on 10 January we will be obliged to comply with the Directive as part of the Withdrawal Agreement. HAT will be working on updating our AML procedures and training to reflect 5MLD and this is expected to be available in February 2020.