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Jul 7, 2022

5AMLD: A Unique Regulation for Europe’s Digital Space

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5AMLD: A Unique Regulation for Europe’s Digital Space

What is 5AMLD or 5th Money Laundering Directive or AML5?

What is the 5th AML directive? The 5th money laundering directive or AML5 is the European Union community rule standard for the prevention of money laundering and terrorist financing. The EU 5th AML Directive (5AMLD) went into effect in early 2020 in order to combat criminal economic activity.

This 5th anti-money laundering directive dramatically changes this concept, creating a unique digital space for client identification in the financial sector.

Thanks to 5AMLD (the 5th directive about money laundering) financial institutions have gained access to 508 million citizens who attend the second international market, with 20 billion Euros of GDP.

Electronic IDentification has the first AML5 solution that allows the identification of customers by video in less than 30 seconds and meets the high level of security required in bank account opening processes.

The 5th Directive about Money Laundering: Previous Situation

So far, and although there are good cross-border practices such as FATF, legislation depends on national regulators, which need authorizations for non-face-to-face identification procedures in order to digitize customer identification processes.

For the 5th money laundering directive for electronic verification, video technology with artificial intelligence has been relied upon to achieve this level of legal and technical security equivalence as face-to-face identification established by 5AMLD.

Picture Or Selfie Solutions Are Not Compliant with AML5

American identity verification solution providers have been confusing compliance departments with their “selfie” solutions being compliant. But they are not.

In fact, over time, the most prestigious analysts have managed to collect relevant information on international regulation and, in no case, for a KYC / CDD (Client Due Diligence) process does a selfie image solution legally meets the requirements of high-risk processes such as opening bank accounts, contracting life policies or pension plans, where end-to-end video streamingis mandatory.

5th EU AML Directive Amendments

The 5th anti-money laundering directive amendments significantly improved the European Union’s ability to prevent its financial system from being used in money laundering or terrorist funding activities.

The following 5th money laundering directive key changes have been made in the 5th EU directive to:

  • enhance transparency by setting up publicly available registers for companies, trusts and other legal arrangements;
  • enhance the powers of EU Financial Intelligence Units, and provide them with access to broad information for the carrying out of their tasks;
  • limit the anonymity related to virtual currencies and wallet providers, but also for pre-paid cards;
  • broaden the criteria for the assessment of high-risk third countries and improve the safeguards for financial transactions to and from such countries;
  • set up central bank account registries or retrieval systems in all Member States;
  • improve the cooperation and enhance of information between anti-money laundering supervisors and prudential supervisors and the European Central Bank.

5AMLD introduces in different sections the European regulation of trust services 920/2014, eIDAS, and delegates to it and to electronic trust services theability to identify new customers.

eIDAS entered into force in July 2016 and has a technical background and specific stipulations on electronic identification solutions; a technical framework for validation solutions.

Why Have the Fifth Money Laundering Directive Regulations Changed?

There are many new channels and financial products coming into the marketplace that will present businesses and consumers with new opportunities, but these also open new opportunities for financial criminals. Thus, the Financial Action Task Force (FATF) has made new guidelines in several areas that aim to enact tighter money laundering and terrorist financing regulations.

This is exactly what the EU set forth in the EU 5AMLD, adopted in April 2018 by the European Parliament shortly after adopting the 4MLD. Since January 2020, the UK and EU members have begun integrating fifth money laundering directive requirements into their own AML and CFT regulations.

Among the factors driving the additional requirements in the 5th EU Anti Money Laundering Directive are:

  • Attacks attributed to lone wolves have changed dramatically from organised groups to lone wolves.
  • The Panama Papers and FinCen leaks, both of which took place around the same time, showed just how much offshore accounts are being used to hide beneficial ownership of offshore companies.
  • The use of cryptocurrencies as well as other digital channels for money laundering is becoming increasingly prevalent.
  • UK’s commitment to implementing FATF recommendations against money laundering.

eIDAS And Its Effect: 5th money laundering directive for electronic verification

AML5 Directive effectively introduces eIDAS regulation for the first time.

With eIDAS, the European Commission creates the concept of a “Digital Single Market”, homogenizing electronic identification solutions.

eIDAS proposes a regional identity document, which provides enormous efficiency in relations between states in all industries and, in particular, the movement and use of financial services by consumers.

With regulations such as PSD2, 5AMLD, eIDAS or GDPR, Europe is being a global pioneer in financial regulation,allowing businesses to take advantage of the opportunities that bring the disruption of the financial system.

Electronic IDentification: A Reference Partner to Adopt AML5 Regulation

Electronic IDentification accompanies financial institutions in implementing the 5th money laundering directive meeting their electronic verification needs with disruptive and innovative solutions that reduce onboarding costs and improve processes.

As a leading company in video identification solutions, Electronic IDentification works on all opportunities of the different AML regulations:

  • Our patented technology of Qualified Electronic Signature and VideoID, meets the requirements for the highest level of security: a qualified international laboratory has evaluated our VideoID solution with this level supported by artificial intelligence and machine learning. VideoID helps companies comply with the 5th money laundering directive electronic verification.
  • Our AML5 solutions allow us to adopt the norm in a simple way, helping businesses and their legal departments to perform the necessary tasks: risk analysis, qualification, and adoption of the rule, and the production execution focused on acquiring new clients in record time.

Discover here how to sign up more than 500M clients across Europe in one single flow compliant with the 5AMLD and eIDAS regulations.

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