What are the AMLD5 requirements around Enhanced Customer Due Diligence (EDD)?

MLR 2017 requires relevant persons to conduct <a href="/glossarycollection/enhanced-due-diligence" style="color:#48277C;" target="_blank" title="Enhanced Due Diligence">EDD</a> in cases where: 

a transaction is complex or unusually large, or there is an unusual pattern of transactions; and 

the transaction or transactions have no apparent economic or legal purpose. 

MLR 2019 splits out these criteria into three alternative limbs. 

5MLD extends the existing requirement to carry out enhanced monitoring of any business relationship or transaction with a person "established in" a high-risk third country so that it covers any relationship or transaction "involving" a high risk country. However, MLR 2019 clarifies that in the UK, "involving" means: 

a business relationship with a person established in a high-risk third country; or 

a transaction subject to <a href="/glossarycollection/customer-due-diligence" style="color:#48277C;" target="_blank" title="Customer Due Diligence">CDD </a> anyway, to which either party is established in a high-risk third country. 

For these purposes, being "established in" a third country means: 

in the case of a legal person, being incorporated in or having its principal place of business in that country, or, in the case of a financial institution or a credit institution, having its principal regulatory authority in that country; and in the case of an individual, being resident in that country, but not merely having been born in that country. 

"High-risk third countries" remain those identified by the European Commission as such, although 5MLD broadens the assessment criteria, suggesting that the list will likely increase. 

MLR 2019 contains a number of additional requirements for business relationships or transactions involving a party "established in" a high-risk country. Obtaining additional information on: 

the customer and on the customer's beneficial owner(s);
the intended nature of the business relationship; 

the source of funds and wealth of the customer and the customer's beneficial owner(s); and 

the reasons for the intended or performed transactions. 

obtaining senior management approval for establishing or continuing the business relationship; 

carrying out enhanced ongoing monitoring of the business relationship by increasing the number and timing of controls applied, and 

selecting patterns of transactions that need further examination.14V