On 24 January 2020, HM Treasury (HMT) published its response to the feedback it received on its consultation on the transposition of the EU Fifth Money Laundering Directive (5MLD). For further information on the consultation, please see our previous blog here.
Points to note in the HMT response include:
- The 5MLD definition of “virtual currencies” has been amended as proposed by HMT to the broader definition set out by the Cryptoasset Taskforce, which encompasses all types of cryptoassets including exchange, security and utility tokens.
- The government will be proceeding with HMT’s proposals to regulate, in addition to fiat-to-crypto exchange services, providers engaged in crypto-to-crypto exchange services, peer-to-peer exchange services, cryptoasset ATMs and issuance of new cryptoassets. Publishers of open-source software and, by extension, non-custodian wallet providers will not be brought into scope of anti-money laundering / countering the financing of terrorism regulation.
- The government will not be introducing the requirement for obliged entities to determine and verify the law to which a body corporate is subject, its constitution and the full names of the board of directors and the senior persons responsible for the operations of the body corporate, rather than to just take ‘reasonable measures’ to determine and verify this information.
- Where the customer is a body corporate and the beneficial owner cannot be identified, obliged entities will be subject to an additional requirement to verify the identity of senior managing
- In accordance with the Financial Action Task Force recommendations, the government has introduced an explicit customer due diligence requirement on understanding the ownership and control structure of customers.
Beneficial ownership requirements
- The government has proceeded with the proposed approach for obliged entities to check public registers when entering into a new business relationship, including that the onus should be on the trust or company to provide relevant evidence when requested by the obliged entity.
- The 5MLD requirement for Member States to maintain adequate, accurate and current information on their central ultimate beneficial ownership (UBO) registers has been transposed into UK law by requiring obliged entities to report directly to Companies House any discrepancies between the UBO information they hold and information held on the public register.
Trust registration service
- The government will be implementing HMT’s proposed deadline of 31 March 2021 for existing unregistered trusts to be registered on the Trust Registration Service (TRS).
- The government will be considering and setting out more detail in a technical consultation HMT’s proposal for trusts created on or after 1 April 2020 to be registered within 30 days of its creation.
- The UK is leaving the EU on 31 January 2020. Should the Withdrawal Agreement be ratified by both parties by this time, the UK will be in an implementation period from this date during which EU law will continue to apply, including obligations under 5MLD.
- The UK played a significant role in the negotiation of 5MLD and shares the objectives which it seeks to achieve on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.