6AMLD is the EU’s biggest step in the fight against money laundering and aims to strengthen its measures on combatting financial crime and terrorist financing by giving Governments and regulatory authorities prosecuting power. The directive also gives businesses more responsibility to ensure compliance.
Arguably this directive is tougher than the regulations announced in 5AMLD and now aims to place a greater responsibility on financial institutions to fight against terrorism financing and money laundering.
The new regulation list recognises 22 offences relating to money laundering and provides clear definitions for each specific crime. Here’s an overview of some of the biggest changes introduced in 6AMLD:
The 6th AML directive aims to harmonise the definition of money laundering across the EU with the goal of removing loopholes in the local legislation of member states.
The 22 ground offences that are outlined in 6AMLD truly reflect the changing nature of the money laundering landscape, and now include offences such as tax crime, insider trading, and environmental crime. One of the stand out offences included in the EU money laundering directive is Cyber Crime which is being highlighted for the first time in this type of context.
When 6AMLD becomes effective in June, all member states have to ensure that their domestic legislation accurately reflects these predicate offences as they relate to financial crimes. This might mean organisations will have to train employees to adjust their compliance processes so they can properly prevent and identify these illegal activities.
One of the revisions under the new directive is the extension of criminal liability to legal persons such as companies or incorporated partnerships. The new rules mean that a legal person could be found guilty of money laundering if it is established that it has not prevented a “directing mind” of the company from carrying out the illegal activity.
Previous regulations only prosecuted those individuals and organisations that directly profited from money laundering, but this new directive ensures that anybody that enables financial crimes is also held legally responsible. Ultimately this step puts organisations on the line for lack of compliance under the new AML legislation.
This step puts organisations on the line for lack of compliance under the new AML legislation.
In a significant step, 6AMLD changed the minimum prison sentence from one year to four years for money laundering offences and also any sentence may be supplemented with fines up to €5 million.
The increase in prison sentences for money laundering and potential financial consequences were introduced to improve consistency in punishments across member states. Not only does the EU want to send a message that they are committed to strictly enforcing money laundering regulations, but they also want to ensure that all member states apply this in the same way.
Under the 6AMLD, EU member states are now required to cooperate with another in the prosecution of money laundering crimes. For example, if a money laundering operation is taking place across two different member States, then these two states should work together going forward to identify the illegal operations, then prosecute and convict the criminals in question.
This means that every member state who was impacted by a specific financial crime will now work together to prosecute the perpetrators. This will help centralise legal proceedings and ensure that judgments are issued in a standardised way across the European Union.
6AMLD also provides a list of factors for authorities to consider when deciding how and where to conduct their investigations. This includes the country of origin of the victim, where the perpetrator resides, and the jurisdiction where the crime took place.
Business verification & enhanced UBO checks
Obliged entities should assess the information available in Know Your Business (KYB) records and begin the information-gathering process to mitigate any gaps in the Ultimate Beneficial Ownership (UBO) data.
Perform ongoing due diligence
Monitor the business relationship and scrutinise transactions undertaken throughout the course of that relationship. Ensure that transactions are consistent with the obliged entity's knowledge of the customer, the business and the source of funds.
Review current Technology
The new legislation should encourage firms to review their current technology deployment in order to ensure that they have the capability to meet their new transaction monitoring and screening obligations.
It may also be necessary to introduce new training for employees in order to understand their new responsibilities – including what suspicious activity to look for in relation to all 22 of the offences set out in 6AMLD.