It’s official: the European Union’s Sixth Anti-Money Laundering Directive (AMLD6) is now in effect for all member states. Building upon the requirements already enforced through AMLD5, the sixth anti-money laundering directive is stricter than its predecessors and introduces a bigger responsibility on financial institutions and regulated entities to fight money laundering and terrorist financing.
But what exactly changes this time around and how will your organisation be affected? More importantly, what action can you take to ensure you’re compliant with the EU’s latest anti-money laundering directive? In this article, we’re answering all the most frequently asked questions we’ve received about AMLD6, including the key highlights you need to know.
Here is what people are asking about AMLD6...
When must AMLD6 be implemented by obligated entities?
AMLD6 must be transposed into national law by 3rd December 2020 and implemented by regulated entities within member states by 3rd June 2021.
Why is AMLD6 important?
Despite previous regulations coming into effect, banks in the European Union paid over $16 billion in AML related fines between 2012 and 2018 - an indication that despite recent overhauls to fight money laundering, challenges remain and are difficult to overcome (source). AMLD6 looks to close loopholes in AML regulations across EU member states by increasing the scope of liability and the severity of consequences for those found guilty of committing offences.
This new directive is considered to be the strictest AML-related measure imposed by the European Union to date and holds serious implications at both an individual and organisational level. National governments will face more pressure than ever before to ensure their legislation meets the requirements outlined and obligated entities will now have even more responsibility on their shoulders when it comes to meeting their compliance requirements.
What are the key changes covered in AMLD6?
In short, AMLD6 expands the breadth of the existing legislation, toughens punishments for violators and also clarifies some regulatory details to help obliged entities effectively fight against money laundering. But there are some key changes and additions to the previous directives as well:
1. The definition of money laundering has been harmonised with a shared list of predicate offences
In an effort to close loopholes in local legislation, AMLD6 works to harmonise the definition of money laundering across its member states. The new directive introduces a list of 22 specific predicate offences for money laundering which member states must criminalise, regardless of whether they are illegal in those jurisdictions currently or not. They are:
- Sexual exploitation
- Illicit arms trafficking
- Robbery or theft
- Counterfeiting currency
- Kidnapping and hostage-taking
- Organised crime and racketeering
- Counterfeiting and pirating products
- Human trafficking and migrant smuggling
- Illicit trafficking in stolen and other goods
- Illicit trafficking in narcotic drugs and psychotropic substances
- Tax crimes relating to direct and indirect taxes
- Insider trading and market manipulation
- Environmental crime (new to the list!)
- Cybercrime (new to the list!)
Also worth noting is that aiding and abetting money laundering, as well as self-laundering, are now also considered criminal acts. This has been added with the goal of holding accomplices to money laundering responsible.
2. Legal persons are now criminally liable
With AMLD6, responsibility will be extended to management employees and employees alike when it comes to anti-money laundering accountability. Legal persons (such as companies), can now be considered guilty of money laundering if it’s decided that they failed to prevent a “directing mind” from carrying out the related illegal activity. The goal of this particular element of the directive is to hold even the largest organisations accountable when it comes to the fight against money laundering.
Liability will also exist in the case where the lack of action, supervision or control of an individual made the money laundering offence possible.
Punishments range from operational suspensions to even permanent closure.
3. Member states are now required to cooperate in cases of money laundering
To address gaps in the cooperation of jurisdictions across the European Union, AMLD6 requires member states to work together in their prosecution of money laundering offences. For example, if multiple member states each hold jurisdiction over the prosecution of an offence, they are required to come together and agree to prosecute in a single member state.
4. Punishments for violators are now tougher
Prior to AMLD6 the minimum prison sentences for money laundering offences was one year. Under the new directive, the minimum prison sentence has been increased to four years and judges will now be able to levy fines against individuals while also excluding entities from accessing public funds. And as mentioned earlier, guilty parties may also find their operations temporarily suspended or even permanently shuttered.
It should be said that while many of the European Union’s member states already go beyond these requirements, the increase to minimum prison sentences and expansion of finable parties and financial punishments is meant to apply consistency across the whole bloc.
5. How can my team prepare for AMLD6?
Time passes quickly. While the deadline to implement may seem a long time away, obligated entities should act now to ensure compliance by 3rd June 2021. The regulatory landscape has expanded, and for good reason, but that means that organisations must also respond to these changes with real action - such as retraining their compliance staff and reviewing their current KYC and KYB processes.
This is also an opportunity to improve competitiveness. With the agility and technological intelligence regulatory technology firms have to offer, these next months could make the difference in not just ensuring your firm’s regulatory compliance but also in eclipsing your competitors by vastly improving tasks like client onboarding/screening and client monitoring with full AML compliance throughout the customer lifecycle.
With RegTech, Know-Your-Customer and Know-Your-Business tasks stop being an "extra" step along the way, they become a perpetual part of your everyday business.
Let's ensure a safer financial future together.