New Anti-Money Laundering rules (5AMLD) lead regulatory changes in 2020
New regulations have driven pivotal change and created opportunity in the payments and banking sector. As the market has developed, regulated financial institutions have been required to comply with additional rules to satisfy the need for security and protection of consumers, business and the industry.
While many regulated players such as PSPs, ISOs, acquirers and digital banking service providers are understandably focused on growing market share and profitability, a similar amount of attention and resources must be dedicated to ensuring compliance.
No compliance, no business
The cost of failing to comply with regulation now greatly exceeding the costs of compliance. A recent report suggests the annual cost to businesses of non-compliance is now an average of $14.8 million, a 45% increase since 2011.
The reality is that without full and timely compliance with rules such as Payment Services Directive (PSD2) and the Fifth Money Laundering Directive (5AMLD), regulated service providers will not have a viable long-term business. As we enter the new year, now is the ideal time to ensure you understand the upcoming changes so your regulated financial institution is prepared for success in 2020.
First up in 2020 – 5AMLD
Eliminating financial crime and money laundering not only protects businesses and private individuals but also promotes trust in the banking services provided by our industry. The first and most imminent regulatory change of 2020 supports this objective.
Regulated financial institutions must be compliant with 5ALMD anti-money laundering rules that became effective from January 10th, 2020. Following implementation, there is a six-month transition period so the final effective date at which all regulated entities must be compliant with 5AMLD is 10 July, 2020.
Important changes to load and online spend limits
Some of the key 5AMLD changes that affect regulated financial institutions include the reduction of load value for anonymous prepaid cards from EUR 250 to EUR 150 without application of Customer Due Diligence (CDD). A new maximum online spend limit per transaction of EUR 50 without application of CDD is also being implemented.
More broadly, 5MLD impacts the following areas:
- Equivalency for schemes from outside the EEA
- Know Your Customer Due Diligence requirements
- Diligence on source of funds for commercial prepaid financial services
And there’s more change coming
More regulatory changes are on the way that relate to PSD2 such as Strong Customer Authentication (SCA) and Know Your Customer (KYC) checks, as well as ongoing changes to Scheme regulations.
Where there are changes to thresholds such as those in the 5MLD regulations, you should ensure systems and controls are tested to ensure the appropriate thresholds can be adjusted. Think about whether you need to revise existing procedures or create new procedures to meet your obligations and make sure your business has adequate resources in place to deliver compliance. You may want to consider hiring a regulatory expert to advise on the compliance process for your business.
Choose your banking services partners wisely
Choosing a partner to help you grow your capabilities in the fintech ecosystem is a big decision. Your reputation becomes dependent on your new partner. Every effort should be made to scrutinise and evaluate their credibility.
Monneo is a regulated financial institution that works closely with service providers such as PSPs, ISOs and acquirers. Through our relationships with traditional banks, those service providers can offer their merchants virtual IBAN accounts from established European banks. Merchants can enjoy the benefits of digital banking services including helping them receive settlements from their service providers.
Compliance is essential to maintaining trust with all our partners. To demonstrate our commitment to compliance, Monneo has its own series of policies that go over and above the requirements of current regulation.
To find out more about how your merchants can open virtual IBANs through Monneo, get in touch today.