How will the broader scope of the EU 6th Anti-Money Laundering Directive (6AMLD) further help financial institutions and authorities in the Member States to combat money laundering and the financing of terrorism?
- The EU has widened the scope of its Anti-Money Laundering Directive in response to the changing threat landscape.
- New regulations will penalise accomplices and enablers to money laundering activities. As well as individuals, this now includes legal entities.
- EU Member States will now also be required to criminalise certain offences whether legal or not within their jurisdictions.
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On 3 December 2020, the European Union’s Sixth Anti-Money Laundering Directive (6AMLD) came into effect for all Member States. Regulated entities operating in the EU will need to be compliant by 3 June 2021.
After the 5th Directive, which greatly strengthened the existing provisions on AML / CFT, the 6th Anti-Money Laundering Directive aims to give financial institutions and authorities the means to do more in the fight against money laundering and the financing of terrorism by widening the scope of existing legislation, clarifying certain regulatory details and tightening criminal sanctions across the EU.
With that in mind, what are 6AMLD’s highlights?
Harmonised definition and predicate offences
The 6th AML Directive aims to harmonise the definition of predicate offences against money laundering by all member states.
To adapt to the changing nature of the European threat landscape, the predicate offences for money laundering now also include cybercrime and environmental crime.
Expanding regulatory scope
The new Directive defines initiators, facilitators, and inciters of crimes as accomplices, so “aiding and abetting” and self-laundering now also constitutes criminal acts and will incur penalties.
Prior to the 6AMLD, EU money laundering regulations sought to penalise those who financially benefited from money laundering activities, but under the new rules, so-called “enablers” will also be legally culpable.
As part of their AML response, firms should now move to ensure their compliance programmes are set up to detect and prevent the aiding and abetting of money laundering.
These criminal acts are described in the Directive (Article 3 (1)) as:
- The conversion or transfer of property, knowing that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his/her actions.
- The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity.
- The acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity.
Prosecution of legal entities
Currently, only individuals can be penalised for the act of money laundering; however, the 6AMLD extends criminal liability to legal entities, such as companies or partnerships. Therefore, firms may be criminally liable for the actions of employees who engage in criminal activity.
A legal entity when proved to be responsible for having participated in one way or another in a fraudulent financial activity may be sanctioned and criminal or non-criminal fines imposed and they additionally face the possibility of other sanctions as defined in the Article 8 as:
- Exclusion from entitlement to public benefits or aid.
- Temporary or permanent exclusion from access to public funding, including tender procedures, grants and concessions.
- Temporary or permanent disqualification from the practice of commercial activities.
- Placing under judicial supervision.
- A judicial winding-up order.
- Temporary or permanent closure of establishments which have been used for committing the offence.
More stringent sanctions in money laundering cases
The legislator intends to hold actors and large companies accountable.
Any offence found in connection with a money laundering activity will be punished by a minimum sentence of four years in prison (previously one year). It is worth remembering, however, that most Member States are already imposing stricter penalties than those in the 6AMLD.
The new Directive also means that legal entities may face the same sanctions and penalties as outlined above.
However, it has been noted by commentators that the 6AMLD fails to make it clear what the criteria are under which directors, trustees or MLROs (money laundering reporting officers) might be open to criminal prosecution under an ambiguous transposition of the Directive by Member States.
What “knowingly” means in a corporate context could also be problematic. For regulated firms who fall under this legislation, the 6AMLD inevitably shifts the onus onto the adequacy of compliance systems in place.
Cooperation between Member States
The crime of money laundering may involve dual criminality, which is the principle that a crime may be committed in one jurisdiction before its financial proceeds are laundered in another.
6AMLD addresses the issue of dual criminality by introducing specific information-sharing requirements between jurisdictions, so that when several Member States are involved, prosecutions may take place in several countries. However, they must coordinate to centralise judicial proceedings in one.
These new provisions of the 6AMLD require all EU Member States to criminalise a serious offence, such as participation in an organised criminal group and racketeering, terrorism, trafficking in human beings and migrant smuggling, sexual exploitation, illicit trafficking in narcotic drugs and psychotropic substances and corruption, whether legal or not in their jurisdiction.
The Directive sets out a range of factors for authorities to consider when deciding how and where to conduct prosecutions, including the victims’ country of origin, the nationality (or residence) of the offender and the jurisdiction in which the offence occurred.
Complying with 6AMLD
Obligated firms should seek to develop an understanding of the adjusted regulatory scope that 6AMLD will bring, including the new listed offences that must be monitored and the new risk environment in which they will be operating.
Watch: Targeted Adverse Media Screening
To help meet their regulatory obligations firms may need to:
- Update their compliance programme to fit the enhanced and widened risk environment
- Implement training for employees to fully understand the implications of the enhanced AML regulations including identifying suspicious activities linked to the expanded list of predicate offences.
- Review existing risk scoring methodologies across their internal procedures and processes
- Review all the automated screening procedures, especially those using Machine Learning, to redo the learning with new defined rules to meet their regulatory obligations.
- Reassess their current adverse media screening processes to ensure they are identifying relevant news that aligns fully to their risk scoring parameters.
Find out more about how Refinitiv can assist you to comply with the EU 6th Anti-Money Laundering Directive by registering for our webinar.