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The ink is barely dry on 4MLD, but it's time to consider 5MLD already.

[fa icon="calendar"] 14-Jul-2017 13:11:13 / by Mike Southgate

Mike Southgate


The reason is that some of the provisions in the current draft have the potential to be a headache to implement. I don't mean the reductions in Simplified Due Diligent thresholds, or the stronger due diligence needed for payments to the EU listed high risk countries (though these are fairly significant) instead I am talking about article 32.  

Article 32a of the proposed changes is  significant. Going forward firms would need provide details of the UBO's for all accounts they hold to a central register.  



The current wording is as follows: 

"Member States shall put in place automated centralised mechanisms, such as central registries or central electronic data retrieval systems, which allow the identification, in a timely manner, of any natural or legal persons holding or controlling payment accounts as defined in Directive 2007/64/EC, financial instruments as defined in Directive 2014/65/EU and bank accounts and safe deposit boxes held by a credit institution within their territory. Member States shall notify the Commission of the characteristics of those national mechanisms." 

This would require that all relevant firm's feed into a central database the UBO information of all accounts they hold. Which firest off, means feeding in information on all accounts they hold and creating a central register of accounts which does not currently exist. 

Some firm's will not currently hold UBO information in a cleanly shareable format (some firm's still hold this information as a PDF of the client's annual returns, particularly for older clients) or they may simply not be in the position to provide this data due to a lack of technical knowledge. UBO information and ownership structures can also be hard to store in a useable fashion as there may multiple layers and structures involved. 

Whilst other provisions in 5MLD do aim to ease the burden on firms, with the provision of open corporate registries providing UBO information for all corporates in EU countries, it will still be the responsibility of firm's to aggregate this information, combine it with their list of accounts and make this information available. Central EU registers will also not help for those firms who operate accounts for overseas firms, but do so from the EU.

It is also unclear at this stage as to how frequently firms would be required to update this information or what format it will be required in. Suffice to say this is shaping up to be a bit like an EU version of FATCA, and firms who do not have their UBO data stored in a 
useful fashion should start to explore their options for providing this data if needed.


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Topics: AML Audit, fincrime

Mike Southgate

Written by Mike Southgate

Mike Southgate, Associate Director and Head of Financial Crime

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