Overview 

The changes update the Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) Regulations 2017 ("the 2017 Regulations") to incorporate international
standards set by the Financial Action Task Force (FATF) and to implement the EU's Fifth Money
Laundering Directive (5MLD).  The UK has implemented this into domestic law via the Money
Laundering and Terrorist Financing (Amendment) Regulations 2019 ('the 2019 Regulations'). 
 
The 2017 Regulations brought in significant changes to the AML regime including; extending the
scope of Customer Due Diligence ('CDD') checks, introduced domestic PEPs (Politically Exposed
Persons) and created a central register of beneficial ownership. The 5MLD builds upon these
changes to better counter the financing of terrorism, and increase transparency in financial
transactions. The amendments are based on the European Commission's 2016 Action Plan to
plug the gap in the terrorist finance and anti-money laundering risks. 

For most businesses subject to the 2017 Regulations, the changes will require updating their
current policies and procedures.  However, the 2019 Regulations have extended the scope to
include businesses in sectors not previously regulated, no doubt causing significant changes to
the way they operate.   This article summarises the key changes:

Extended Scope

The 2019 Regulations extend the scope of persons subject to the 2017 Regulations to include;
Virtual currency providers and custodian wallet providers; Art traders (with a transaction of
EUR10, 000 or more); those who carry out similar services to accountants and tax advisors as a
principal business activity; Estate agents who deal with letting transactions of EUR10, 000 or
more a month. These changes are intended to close perceived loopholes and to account for
changes in behaviour from new technologies. In some areas, the 2019 Regulations take a wider
approach than that of the 5MLD. For example, the 2019 Regulations provide a wider interpretation
of "Cryptoassets" to capture exchange, security and utility tokens.
 
Financial Intelligence Units ('FIU')

The 2019 Regulations bring a greater focus on enhanced information sharing. Powers given to
the EU Financial Intelligence Units', to have increased access to information in a centralised bank
and payment account register to better identify account holders. By 10 September 2020, Member
States are required to set up a national centralised mechanism. Bank and payment account
owners must be registered along with safety deposit holders. Information available would include
the IBAN number, identification number of the customer, beneficial owner etc. The information will
only be accessible to FUI's and are not to be made available to the public. This new power places
a duty on credit institutions, and the providers of safety deposit boxes to respond to requests for
information. FIU's have also been given the power to request money laundering and terrorist
financing information from firms, even where the firm has not submitted a suspicious activity
report (SARs), as previously required under the 2017 Regulations.  

Beneficial Ownership Structures 

The 2017 Regulations introduced a register of beneficial ownership information for corporate and
legal entities, available to those who have a legitimate interest. In line with the aim for greater
transparency, The 2019 Regulations brings the beneficial ownership register into the public
domain, and there is no longer a need to show a legitimate interest to gain access. Where the
beneficial owner of a corporate organisation cannot be established, senior managing officials must
be identified. The 2019 Regulations expands the registration of beneficial owners of taxable trusts,
to include express trusts. Further amendments place a greater need for firms to update their
records to accurately reflect the beneficial ownership of corporate clients. Where there are
differences from the information held by the firm, and that of Companies House, a new
'discrepancy reporting requirement' creates a duty to report these differences to Companies
House. An exception applies where the information is protected by legal professional privilege.
 
Enhanced Due Diligence ('EDD') 

Previously member states determined their own type of Enhanced Due Diligence ('EDD') to be
applied to high-risk third countries, this has changed to a more harmonised approach across
member states. In particular, The 2019 Regulations amend the 2017 Regulations by setting out a
list of EDD measures that must be applied to high-risk third countries. The 2019 Regulations have
widened the triggers for EDD, transactions relating to  - arms; oil; precious metal; tobacco
products etc. have all become new risk factors to be considered. A transaction which is
considered unusual "or" complex, rather than unusual "and" complex will also trigger EDD. 

Politically Exposed Persons ('PEPs') 

Each member state, and the international organisations accredited to them, will be required to
keep an up-to-date list of exact functions, which qualify as prominent public functions. These lists
will be given to the EU Commission, and made available for public access. 
 
Customer Due Diligence ('CDD')

To minimise the anonymity around prepaid cards. The 2019 Regulations amend the 2017
Regulations by narrowing the E-money exemption so that firms can only forgo CDD for electronic
payments where the maximum amount stored electronically is EUR150 (previously EUR250); are
non-reloadable and have a maximum monthly payment transaction limit of EUR150. Remote
payment transactions higher than EUR50 are not subject to CDD. If the electronic payment
product is issued in a non-EU country, then it can only be used if the country of issue has AML
legislation equivalent to the 2017 Regulation.  In addition to documents, data or information from a
reliable and independent source as set out in the 2017 regulations, the 2019 Regulations expands
CDD to include electronic identification means that have been approved by national authorises.