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/ News / Legal Director Nicola Sharp discusses the 5th Money Laundering Directive with The Times

Legal Director Nicola Sharp discusses the 5th Money Laundering Directive with The Times

A centralised solution is needed to tackle the international problem of money laundering, writes Nicola Sharp

On January 10 the Fifth Anti-Money Laundering Directive will become law throughout the European Union, but there are already concerns over whether it will be effective.

The law is intended to build on the fourth directive’s attack on financial crime by boosting transparency rules. As a result it has several goals: creating safeguards to prevent money coming from high-risk countries, giving more power to the EU’s financial intelligence units, ensuring the launch of centralised national bank and payment account registers or central data retrieval systems in all member states, putting an end to the use of virtual currencies by terrorist groups and minimising the risks associated with prepaid cards.

Whether the fifth directive will achieve those high aims is debatable.

It would be wrong to blame the minds behind the law for failing to foresee complications that the Brexit saga poses. But they should have been aware of one obvious issue relating to the fifth directive’s implementation. After all, the seeds of doubt have been sown across Europe — and have been there since the arrival of the fourth directive.

It is less than 16 months since Vera Jourova, justice commissioner of the European Commission, criticised 20 EU states for the slow and unsatisfactory transposition of the fourth directive into national laws. More than a year after the deadline only a handful of member states had done so.

So how realistic is it to expect every state to be ready to go with the fifth directive come January 2020?

The EU is trying to use decentralised national authorities to deal with an international problem. It falls to each member state to independently monitor and enforce the fifth directive.

All the evidence so far points to this being overly optimistic. In many EU countries there appears to be a lack of either political will or capacity to ensure that the fifth directive does what it has been introduced to do.

If the EU really wants to meet the international challenge of combating money laundering, it needs one body to take responsibility for co-ordinating all necessary efforts.

Take just one aspect of fifth directive: it extends beneficial ownership reporting requirements to any legal arrangement similar to a trust and to tax neutral trusts, and widens access to the central register of beneficial ownership to any person who can show a “legitimate interest”. The UK has a public central register of the ultimate controllers of companies, yet this information is not independently verified and its governance is limited — and it is likely to be some time before every EU country has such a complete, accurate register.

It is a symptom of a disjointed approach to a problem — a problem that needs to be met in a more concerted, consistent manner than the fifth directive has devised.

This article originally featured on The Times (subscription required).

Nicola Sharp

Nicola Sharp

Legal Director

nicola.sharp@rahmanravelli.co.uk
+44 (0)203 910 4567 vCard

Specialist Areas of Practice: International Regulation and Corporate Crime, Fraud and Business Crime, Civil Fraud, Corporate Investigations

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