The Fifth Anti-Money Laundering Directive (5AMLD)

The 5AMLD was administered on January 10, 2020, to update the regulatory regime applied under its predecessor, 4AMLD. It strengthens the European Union’s Anti-Money Laundering/Combating the Financing (AML/CFT) regime to address several emerging and ongoing issues.

The impact has been far-reaching. In this article, we will discuss the fundamental changes brought by 5AMLD and understand why they matter from an industry perspective.

Key Dates for 5MLD Implementation

• January 10, 2020 – Setup beneficial ownership for corporates
• March 10, 2020 – Setup beneficial ownership for trusts
• September 10, 2020 – Setup automated and centralized mechanisms to identify individuals who own or control bank and payment accounts

1. E-Money & Prepaid Cards

The 4AMLD introduced a monthly transaction limit on unidentified prepaid cards of €250 to target criminal financing. The 5AMLD lowered this limit to €150, which also applies to stored funds on the cards. Organizations must now perform identity checks on customers using prepaid cards funded above this limit. Additionally, unidentified remote or online transactions are capped at €50.

Prepaid cards issued outside the EU will be banned unless they come from a country with legislation equivalent to the 5AMLD.

2. Ultimate Beneficial Ownership (UBO)

The 4AMLD, introduced in 2017, aimed to improve ultimate beneficial ownership (UBO) transparency for money-laundering prevention. The 5AMLD enhances these measures by requiring:

• Public access to UBO lists within 18 months of the directive’s implementation
• Trusts and similar entities to comply with beneficial ownership regulations
• National UBO registers to be interconnected at the EU level for better cooperation
• Stronger verification tools for UBO data
• Separate UBO registers for bank accounts, accessible only to authorities

3. Enhanced Due Diligence (EDD) for High-Risk Third Countries

Businesses dealing with customers from high-risk third countries must conduct enhanced due diligence (EDD) to mitigate money laundering risks. These companies must:

• Gather customer and UBO information, including transaction purposes and sources of wealth
• Obtain approval before forming business relations with high-risk third countries
• Report relevant details to senior management
• Implement stricter controls over high-risk transactions

4. Politically Exposed Persons (PEPs)

The 5AMLD requires EU member states to compile and publicly release a functional list of politically exposed persons (PEPs), including key public functions. The EU is also tasked with maintaining an EU-level PEP list.

These lists are not person-specific but outline politically sensitive positions. They help compliance teams screen and monitor individuals in high-risk roles.

5. High-Value Goods & the Art Market

For the first time, the directive applies AML checks to high-value goods transactions of €10,000 or more, particularly in the art sector. Art traders and intermediaries must comply with AML/CFT reporting requirements and conduct due diligence on their customers.

The directive also covers transactions involving high-risk goods like tobacco, oil, precious metals, and cultural artifacts, aiming to curb terrorist financing through illicit trade.

6. Virtual Currencies & Cryptocurrency Exchanges

The 5AMLD introduces significant regulations for virtual currencies and cryptocurrency exchanges, requiring:

• Increased transparency around legal entity ownership to prevent money laundering
• Improved access to financial data via centralized bank account registers
• Stricter monitoring of anonymous cryptocurrency transactions
• Enhanced collaboration between the European Central Bank and AML regulators
• Registration of cryptocurrency exchanges and wallet providers with national financial authorities (e.g., the Financial Conduct Authority (FCA) in the UK and BaFin in Germany)

As a result, many European crypto businesses have struggled to comply with the new regulations, leading some, like Bottle Pay, to shut down operations.

Conclusion

Entities subject to AML/CFT regulations must assess their compliance strategies and strengthen KYC policies to align with national regulatory standards. Failure to comply can result in penalties and enforcement actions.

To ensure compliance with 5AMLD, organizations should start evaluating their AML obligations now.

👉 Need help with AML compliance? Request a demo today!