On 19 June 2018, the text for the Fifth Anti-Money Laundering Directive (MLD5) was published in the Official Journal of the European Union. MLD5 entered into force on 9 July 2018.
The directive has brought certain virtual currency services within the scope of the European anti-money laundering framework, realising an action plan adopted by the European Commission over two years ago.
This latest step comes after political agreement on the language of MLD5 was reached in December 2017,1 with the European Parliament then agreeing to the draft text on 19 April 2018.2 The rules were then adopted by the Council of the European Union at a meeting of the General Affairs Council, without discussion. The adoption of MLD5 marks the end of a two-year legislative process, which began with the European Commission’s proposal in 2016 (see our client alert here).
One of the aims of MLD5 is to increase transparency in newly developed payment methods, and thereby bring virtual currencies into the scope of European anti-money laundering regulation. The new language consequently expands the existing directive to cover “virtual currency exchanges” and “custodian wallet providers”, with the result that these businesses will need to carry out customer due diligence on prospective clients.