In 2018, the European Union decided to release a new directive regarding anti-money laundering and counter terrorist financing. The directive 2018/843/EU, also called the 5th Anti-Money Laundering Directive (5AMLD), will come into force in EU countries’ law no later than January 20th, 2020. The directive looks to improve the prerequisites for companies and institutions to prevent financial systems being used for financing or cover-up criminal activity as well as improve the framework, especially regarding the increased usage of new technology for terrorist financing.

We have summarised some of the most important changes in the directive and how they affect Trapets, our customers and our products.

Beneficial Ownership – registry

Through the 5AMLD, the transparency of beneficial ownership behind companies will be more thoroughly regulated and will now include trusts and similar entities. The new rules mean that the register of beneficial ownership for companies must be made public and that the citizenship of the beneficial owner must be included. When it comes to register beneficial owners for trusts, the regulatory framework differs between member states, which means that many can avoid registering or monitoring. In order to counteract this and allow for greater transparency of foreign control and ownership structures, the cooperation between member states should be emphasized, and registers of beneficial owners for trust should be linked.

Requirements for register controls

The amending directive introduces a requirement that the business operator’s investigation of their client’s beneficial owners should also include register control. Register control means that information is retrieved from a register that is covered by the Act (2017:631) on the registration of beneficial owners.

Trapets provides screening for beneficial owners in both InstantWatch KYC and InstantWatch AML. The service also includes system support for logging the register control carried out.

Discrepancy reports

In connection with the requirements for register control of beneficial owners, it’s worth mentioning that the 5AMLD requires business operators to report discrepancies between information in the register and information that their clients submit to them. This was already a requirement under Swedish Legislation (Act 2017:631 under the registration of beneficial owners, Chapter 3, section 5) but it’s now more clearly defined at EU level.

In the current version of InstantWatch AML, the system detects and registers any changes in the owner register.

Register of functions regarded as PEP

Each Member State has an obligation to create and maintain a register containing the functions considered PEP in each country. The EU will compile these lists and make them available to the public.

When these lists are made available, Trapets will use them to further refine our already market-leading Nordic List of PEP and RCA and additionally, refine checks against non-Nordic lists.

High-risk third countries

The new directive imposes stricter requirements for firmer action on business relations or transactions with countries that are on the EU Commission’s list of high-risk third countries.

Trapets’ AML system, InstantWatch AML, has support for identifying and raising the risk value of clients established in high-risk third countries. In addition, it is possible to place targeted monotoring on transactions carried out in high-risk third countries, provided that the country information appears in the transaction data.

Trapets is also in the process of launching a new service for managing and monitoring client due diligence; CDD. The services mean, among other things, that business operators can identify clients where there is a demand for in-depth customer knowledge and can conduct targeted KYC questionnaires to affected customers and configure how often they should update their customer knowledge information.

Greater exchange of information between financial institutions

With the new directive, it is now allowed to share information not only within one entity or group, but also with other credit institutions or financial institutions, considering the rules that exist for the protection of personal data in the respective EU country’s law.

Extended power for the Financial Intelligence Unit

The 5AMLD gives national Financial Intelligence Units (FIU) increased power to request information from financial institutions, in some cases even without prior reporting of suspicious activity for the institution in question. The FIU’s shall also be empowered to request such information at the request of a FIU in another Member State.

Read more on the EU’s website.