The 26 June 2017 deadline is fast approaching to implement 4MLD and WTR2
Many organisations will now be finalising their implementation of the Directive implementing 4MLD and the 2nd Wire Transfer Regulations (sometimes called the Funds Transfer Regulations), particularly as the deadline for doing so is now fast approaching.
Helpfully, the UK Treasury and JMLSG have issued their draft regulations and guidance in the form of:
- The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and
- A redline of Part 1 of the JMLSG Guidance proposing edits related to 4MLD and WTR2.
However, they are yet to be published in final and there are still some areas which may have a substantial impact and require clarity.
What areas of 4MLD still require close scrutiny?
There are a number of areas which still require additional clarity, however, one, which will be applicable to many, relates to the risk assessments to be issued by a firm’s applicable supervisory authorities. While the UK has previously issued its first National AML/CTF Risk Assessment, there are institutions which have still yet to issue and/or update theirs.
Why is it important?
The issuing of a supervisory authority risk assessment is important to a firm as it has to factor these assessments into its own, as well as factor in the authority’s assessment when considering whether it can take advantage of matters such as ‘simplified due diligence’.
This will be of particular importance to e-money issuers, particularly those which have previously relied upon the simplified due diligence provisions under 3MLD and are seeking to carry this approach across in a 4MLD world.
Leaving aside the proposals under draft 5MLD, it will be important for e-money issuers seeking to rely on the simplified due diligence measures that any applicable supervisory authority risk assessment does not substantially fetter their ability to do so. As e-money products and services differ greatly in their function and purpose, it will also be important that all e-money issuance is not treated the same way for ML/TF purposes. ‘Relevant persons’ in other industries will also be closely monitoring these matters as it will have a similar impact on their operational processes.