Our website uses cookies so that you can place orders and we can provide a better service. Continue to use the site as normal if you're happy with this, or find out how to manage cookies.closed

0800 085 8050

EU 4th Money Laundering Directive
EU 4th Money Laundering Directive

EU 4th Money Laundering Directive

What effect will the introduction of the Fourth Money Laundering Directive have on the way firms conduct their anti-money laundering procedures?

The European Union’s Fourth Anti-Money Laundering Directive (EU4MLD) will be implemented into UK law by June 26 2017.   The directive includes fundamental changes to AML procedures at law firms, including changes to customer due diligence (CDD) and a strong focus on risk assessments.

 What’s changing?

  • Under current Money Laundering Regulations (EU3MLD), firms could automatically apply simplified CDD under certain circumstances.  Under new regulations, firms will be able to use these circumstances as a partial justification for simplified CDD only after conducting a documented risk assessment.

  • Exemption from enhanced CDD is no longer automatic. A decision to apply simplified CDD will need to be evidenced by a documented risk assessment and include PEP and Financial Sanctions screening.

  • Local politically-exposed persons (PEPs) must now be identified and will be subject to the same scrutiny as foreign PEPs.

  • The regulations direct firms to develop risk-based policies, and practitioners to conduct client risk assessments as a part of their CDD.

  • UK regulations already incorporate a risk-based approach, but the new directive goes considerably further requiring documented client risk assessments.

For law firms this means:

  • Demonstrating that risk assessments are conducted and kept up-to date, including: clients, countries or geographic areas, products, services, relationships, transactions or delivery channels.

  • Policies and procedures that take the firm’s risk assessment into consideration.

  • Testing of internal policies, controls and procedures.

  • Training staff in conducting risk assessments, CDD and ongoing due-diligence.

  • Compliance reporting, electronic and hard copy records management.


Law firms with majority-owned subsidiaries in other countries where minimum AML requirements are not as stringent, must also implement the same procedures with the subsidiaries.

Additionally, for all businesses, CDD will be required when trading goods in cash with a value over €10,000 (rather than €15,000).

What can law firms do to prepare?

      • Review existing providers of CDD services for compliance with new regulations.

      • Review integrating AML risk assessment and compliance systems to reduce costs, streamline and unify procedures firm-wide.

      • Policies should be reviewed and approved by senior management

      • Implement staff training.

      • Money laundering reporting officers should:

          • Perform and document an internal risk assessment.
          • Update policies to incorporate Client Risk Assessments, ongoing due diligence, documentary evidence and compliance reporting.
          • Audit and test.

         

        A standard AML search (AML Search v2), currently available through the Geodesys ordering website, provides you with fast and accurate electronic screening of clients.  It includes PEP and Financial Sanctions screening, and is fully compliant with the new regulations.   View full details of data sources screened

        An enhanced version of the AML search (AML Search v4) will be available on our site shortly.  AML v4 screens the same details as AML v2 but offers smart technology for you to manage your risk assessment procedures, saving your firm time and money.

         

tooltip
tooltip
tooltip
tooltip