Brexit, Money Laundering and Terrorist Financing

On 15th April 2019, H.M. Treasury published a consultation paper with the memorable title of "Transposition of the Fifth Money Laundering Directive". The consultation period ends on 10th June 2019.

The EU Fifth Money Laundering Directive 2018/843 ( "MLD5") was enacted on 30th May 2018 and came into force on 10th July 2018 and has to be transposed into national law by 10th January 2020.

Notwithstanding Brexit, the UK has played a leading role in developing MLD5, which strengthens the anti-money laundering ( AML) and counter-terrorist financing (CTF) regime laid down by the Fourth Money Laundering Directive  2015/849 which came into force on 26th June 2017.

MLD5 provides, amongst other things, for the regulation of crypto currency platforms and custodian wallet providers as well as improving access to beneficial ownership registers for corporates and trusts. It also introduces central registers of payment and bank accounts and safe-deposit boxes and broadens the definition of regulated "obliged entities" to cover categories of tax advisors , letting agents and  art intermediaries  not covered up to now.

Such is the enthusiasm of the UK Government for this type of legislation that a principal object of the UK Government's consultation paper is to explore whether MLD5 as introduced into the UK should be gold-plated ( ie enhanced) in certain respects. In particular, whilst MLD5 only seeks to regulate so-called fiat- to - crypto exchange and custodian wallet services, HM Government questions whether such regulation should also extend to crypto-to-crypto exchange service providers and others involved in the crypto -currency market and to the publication of open-source software at any time.

It is likely that ML5 will have a  far-reaching effect on the financial markets and on the way that business is done in the EU and, if Brexit happens, the UK. 

Hopefully , both the EU and the UK are moving in the same direction on AML and CTF regulation.