On 15 April 2019, HM Treasury published a consultation paper on the transposition of 5 MLD into UK law. This will involve amendment to MLR 2017 or perhaps a completely new set of regulations.
It is a lengthy document (84pp) and poses 106 questions.
This Insight will not summarise the paper but seek to indicate the direction of travel in summary form that the Government appears to be taking in a few selected areas
Should the EUR10,000/month limit be lowered? Should private landlords be included? Should CDD be carried out on both the landlord and tenant? Should BOs, officers and managers be subject to approval under Reg26?
HMRC to be the supervisor.
To include exchange, security and utility tokens. The UK may add provisions to those in 5MLD to include crypto-to-crypto exchanges, initial coin offerings (ICOs), peer-to-peer exchanges and crypto ATMs. Further consultation on the regulatory perimeter in relation in security and utility tokens.
FCA to be the supervisor.
Closely parallels treatment of high value traders except it covers all payments over the threshold not just those made in cash. UK to define ‘works of art’.
Should BOs, officers and managers be subject to approval under Reg26?
No legislation proposed on free ports as there are none in the UK.
HMRC to be the supervisor.
The UK will adopt 5MLD as is but may provide exemptions depending on the result of the consultation. A ban on anonymous pre-paid cards is being considered.
Supervisory arrangements as at present.
No currently unlawful in the UK.
Covered by JMLSG guidance
Adopts 5MLD. UK proposes to put the onus to produce information on the trust or company on the obliged entity’s request.
Enhanced Due Diligence
The UK will adopt the 5MLD with respect to EDD on high-risk third countries although this seems moot since the existing list is very short and obliged entities are unlikely to be dealing with those countries. The new list proposed by the European Commission has been rejected by the US.
Politically Exposed Persons [PEPs]
The paper reminds that the FCA has already issued ‘statutory’ guidance listing precisely which offices and functions qualify as a prominent public function with a high degree of granularity and sets out that list. That list is exhaustive. The paper further reminds that the FCA guidance is that UK PEPs are to be considered low risk unless factors other than being a PEP would make an individual high-risk.
The clear message is that the FCA PEP Guidance should be followed.
Discrepancies in BO Information
The UK has not yet decided whether the onus on reporting deficiencies in information held by Companies House should be reported by obliged entities or competent authorities.
Trust Registration Service [TRS]
The UK will transpose 5MLD as drafted but may require additional ID data (for example NI or passport numbers). HMRC will require more information on trusts that generate tax consequences.
Onus on trustees to decide if they need to register.
National Register of Bank Account Ownership
The UK will transpose as drafted but may add UK-incorporated credit and payment institutions that issue credit cards, e-money issuers that issue prepaid payment cards and credit unions/building societies that have accounts without IBANs.
It seems surprising that there have been no civil liberty-based objections to this proposal to date.
Register of Real Estate Ownership
The paper notes that the UK is legislating to establish a register of UK real estate owned by entities with overseas BO.
5MLD will not be adopted as UK arrangements are already satisfactory.
5th Money Laundering Directive Timeline
The consultation paper can be found at:
Closing date for comments is 10 June 2019.
5MLD is not a stand-alone document as it makes extensive amendments to the Fourth Money Laundering Directive [4MLD] and so both Directives [must] [can only] be read together.
A useful consolidated text of 4MLD and 5MLD can be found at:
This is not an official consolidated text but it will be safe to rely on.