What does 5AMLD mean for me?

2020 is set to be the year that the Solicitors Regulation Authority (SRA) step up their scrutiny and come down harder on firms who are failing to comply with the regulations.

2020 is set to be the year that the Solicitors Regulation Authority (SRA) step up their scrutiny and come down harder on firms who are failing to comply with the regulations. 

Regulatory changes can happen quickly, and sometimes it can seem tricky to understand what exactly is required to ensure your firm remains compliant. Especially if it’s not written down in black and white, with a step by step guide of what to do. 

On Friday 10th January 2020, the Fifth Money Laundering Directive (5AMLD) came into force. This is an update on the Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and as a result now scrutinises the digital world under a microscope.  

This update has even seen cryptocurrency exchange platforms becoming accountable and the use of electronic verification getting the green light from regulators. 

Tackling money laundering the fraudulent use of funds, is obviously a big part 5AMLD, in the hopes of tightening up defences against criminals who want to use the legal sector as a cash cow. 

The 5AMLD regulations state: 

“(19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where […] 

“(a) it is obtained by means of an electronic identification process, including by using electronic identification means or by using a trust service (within the meanings of those terms in Regulation) 

“(EU) No 910/2014 of the European Parliament and of the Council of 23rd July 2014 on electronic identification and trust services for electronic transactions in the internal market(11)); and… 

“b) that process is secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity.” 

What steps can my firm take to help embrace the new regulations? 

As with any type of new regulation, processes need to be embedded into an organisation to ensure every member of the team is pulling in the same direction. This way if a regulator did come and conduct a review, your process can clearly be evidenced. 

  • Client due diligence – firms need to ensure the client they are acting for are who they say they are and have the relevant funds. It’s imperative to ensure you’ve identified all relevant parties in the transaction, including beneficial owners. Completing source of funds and source of wealth checks enable you to ensure the client isn’t starting off in a dishonest manner 
  • Enhanced due diligence – the directive requires enhanced due diligence in relation to transactions that are being conducted from those in high risk countries, with extra information needing to be recorded. Such as, information on the beneficial ownership of the property and background on the intended transaction.   
  • How to identify Politically Exposed Person (PEPs), relatives and close associates 
  • Staff training – ensure that your staff are trained and have regular refresher training, building a positive culture around anti-money laundering and the steps that can be taken to combat it 
  • Know when it’s appropriate to make Suspicious Activity Reports (SARs) – and follow the process to ensure it’s made in the correct manner 

Finally, with any process or procedure it’s paramount to ensure your record keeping is maintained throughout. Revisiting the audit trail will be the first port of call for regulators.  

Verify client ID and source of funds in minutes

We have partnered with the next generation ID and source of funds checker tool Thirdfort. 

Thirdfort combines facial recognition technology and document verification into a mobile app, to enable you to verify your client’s ID in minutes. It has the capability to check 4,500 different types of documents spanning 195 nationalities.  

The technology also combines with open banking, ensuring you can check the source of funds and wealth that your clients have, as well as any PEPs or other sanctions. 

Book a demo

Now available through Lawyer Checker, we’d encourage you to book your demonstration with a member of our team. Please call 0800 133 7127 or email support@lawyerchecker.co.uk