The REGTECH Book

RegTech Opportunities in a Post-4MLD/5MLD World

By Jane Jee¹ and Fleur Hutchinson²

¹CEO, Kompli-Global Limited

²Enhanced Due Diligence Consultant, Seventeen Research Ltd

In June 2017 the then new UK government implemented the 4th EU Money Laundering Directive (4MLD) with regulations – the snappily titled ‘The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’ or MLRs as we shall call them. The MLRs were set to make money laundering and terrorist financing more difficult and could have been much more effective had they been embraced and properly implemented by all member states and regulated firms.

However even 4MLD was soon seen as inadequate, due in part to the growing concerns over terrorist financing and the revelations of the Panama Papers. The Fifth Anti-Money Laundering Directive (5MLD) entered into force in July 2018 with an obligation for EU member states to implement it by January 2020.

5MLD builds upon 4MLD and extends it. For example, for the first time, 5MLD brings certain virtual currency service providers within the scope of EU anti-money laundering and terrorist financing regulations. The other main 5MLD provisions require EU member states to:

• increase transparency with respect to the beneficial ownership registers that they were required to establish under 4MLD;
• create and maintain a list of public functions that qualify as “politically exposed persons” or “PEPs” in their jurisdiction;
• establish centralized ...