The Directive implements five key changes:

1. Scope
a. It has increased in scope. The requirement for certain entities to carry out CDD has increased (e.g. from just casinos across the entire gambling sector and for high value goods traders).

2. Risk-based approach

a. It increases the emphasis on a risk-based approach (which has already formed part of the UK AML regime for many years). The Directive acknowledges that measures should be adjusted according to the level of risk presented in specific jurisdiction and sectors and clarifies situations when simplified customer due diligence (CDD) will be appropriate. It has been argued, for example, that too many financial institutions have adopted simplified CDD in circumstances where more detailed CDD was appropriate.

3. Politically exposed persons (PEPs)

a. It incorporates recommendations relating to PEPs. As well as clarifying that enhanced due diligence is always appropriate when transactions involve PEPs, the Directive also widens the definition of PEP to include domestic individuals holding prominent positions in their home country. As with foreign PEPs, the provisions will apply to family members and known close associates.

4. Tax crimes

a. It includes tax crimes as a predicate offence for money laundering for the first time in the EU. Tax crimes have long been predicate offences in the UK, though this is not the case in many other jurisdictions.

5. Beneficial ownership

a. It increases transparency around beneficial ownership of companies and trusts.
b. The threshold for beneficial ownership remains unchanged—being those controlling more than 25% of a business—but companies (and maybe trusts) will be required to maintain records evidencing beneficial ownership.
c. This is the most controversial requirement in the Directive.
d. It is not clear whether member states will interpret the obligation widely (as an obligation to hold the information publicly) or more narrowly (as an obligation to provide the information on a transactional basis only).
e. The UK government is in favour of public registers for companies but not trusts.