This blog was originally created by RDC and published on rdc.com.
What is the EU Sixth Anti-Money Laundering Directive?
As part of efforts to ensure convergent and effective financial supervision, the European Parliament and the European Commission drafted a proposal in September 2018 to create not only stronger, but also more harmonised rules for the financial markets. This directive, which is widely referred to in the industry as the Sixth Anti-Money Laundering Directive (6AMLD), will be led and overseen by the European Banking Authority (EBA).
EU member states will have until 3 December 2020 by which to transpose 6AMLD into national law, with regulated entities then needing to implement relevant regulations by 3 June 2021.
Director of Anti-Financial Crime Solutions, Hugo Veazey, gives his rundown on the Directive and the key amendments that regulated financial institutions in the EU will need to be aware of.
Key Amendments of the 6AMLD
- Increased cooperation between EU member states
The Directive outlines an expectation of greater cooperation between EU member states in relation to financial crime, especially regarding cross-border issues – something which would avoid having to maintain a single, cross-continent Financial Intelligence Unit (FIU).
- Unified predicate offences
To help augment an increase in cooperation between EU member states, 22 predicate offences have been defined and notable amongst these are standard terminology relating to environmental crime, self-laundering, tax crime and cybercrime. Businesses should ensure these are covered in their KYC screening and monitoring solutions.
- Sufficient resources and technological capability
Regulated firms will need to develop a good understanding of not only the predicate offences, but also the types of risks and the associated factors involved. Further, there is an expectation that sufficient resources and personnel be in place and that training will be provided to relevant staff to enable recognition of risk factors. Firms will also need to ensure they have up-to-date technological capabilities.
- Addition of criminal liability for legal persons
A new policy will be adopted in relation to offences committed which can be attributed to a legal person (i.e. a corporate entity or company) or a natural person (i.e. an individual). This is a significant change as it confers responsibility to management as well as company employees acting separately.
- Addition of the offence: Aiding and abetting, inciting and attempting
A further strengthening of the directive includes the addition of ‘aiding and abetting, inciting and attempting an offence' of money laundering, which, in itself, constitutes a crime and is ‘punishable as a criminal offence’.
- Tougher punishments for money laundering offences
The minimum custodial sentence for money laundering offences is being increased from one to four years and the maximum fine upped to €5m (or non-Euro equivalent). The Directive indicates the need for penalties to be seen as ‘dissuasive’.
- Tightening measures for virtual currencies (including cryptocurrency)
There will also be stricter and more consistent measures relating to virtual currencies (including crypto). There is a drive by regulators to determine what and which aspects of the cryptocurrency process require supervision and commentary will be provided when the situation is clearer.
What's Next for the EU's AML regulations?
Given how frequently regulations can and do change, it is reasonable to conclude that additional legislation may be forthcoming from the EU over time. Consequently, it is imperative that all relevant entities are continually appraised of the regulatory environment to ensure they are compliant.
To put this into context, 5AMLD must be transposed by member states into national law by January 2020 and yet 6AMLD will soon be upon us and there is also speculation that EU politicians are already considering 7AMLD.
Denmark have confirmed that they will not be adopting 6AMLD due to the terms of their agreement with the EU and, due to Brexit complications, it is impossible to say if, or in what capacity, the UK will adopt the legislation.
In addition to presenting legal requirements for regulated EU firms, the 6AMLD should certainly be seen as an opportunity to strengthen anti-money laundering capabilities and for teams to become more efficient in dealing with financial crime risk.