5th Anti-Money Laundering Directive (AMLD5) – Crypto Glossary Term
Definition: The 5th Anti-Money Laundering Directive (AMLD5) is a legislative framework established by the European Union (EU) to combat money laundering and the financing of terrorism within the EU. It was officially published on July 9, 2018, with the requirement for all EU member states to incorporate its provisions into their national laws by January 10, 2020.
Key Points:
- Objective: AMLD5 aims to enhance anti-money laundering (AML) and counter the financing of terrorism (CFT) policies within the EU. It addresses vulnerabilities and closes loopholes that have been exploited by financial criminals, aligning the EU’s regulations with international standards.
- Inclusion of Cryptocurrencies: A significant aspect of AMLD5 is its coverage of cryptocurrencies, virtual assets, and virtual asset service providers (VASPs). Cryptocurrency exchanges, custodian wallet service providers, and related entities are considered “obliged entities” under the directive.
- Compliance Requirements: Obliged entities, including cryptocurrency-related businesses, must adhere to several compliance measures. These include conducting customer due diligence (CDD) procedures, reporting suspicious activities, and registering with local competent authorities.
- Ultimate Beneficial Owner (UBO) Registers: AMLD5 mandates the establishment of UBO registers, which require companies and legal entities to disclose information about their beneficial owners. This enhances transparency and helps prevent money laundering through opaque corporate structures.
- Prepaid Card Transaction Limits: The directive sets transaction limits for prepaid cards, reducing the potential for anonymity in financial transactions and making it more difficult for illicit funds to be transferred.
- FATF Alignment: AMLD5 aligns with the Financial Action Task Force (FATF) Standards, particularly the FATF’s guidance on virtual assets and VASPs. This ensures that the EU’s AML/CFT regulations are consistent with global best practices.
- Directive Framework: A directive is a legal instrument within the EU that outlines common goals for member states to achieve by incorporating the directive’s provisions into their national legislation. While directives are not inherently legally binding, failure to implement them can result in fines for member states.