The past year has been a period of significant change and challenge for businesses. Whilst all were forced to adapt to the unexpected circumstances presented by the COVID-19 crisis, regulated businesses were also faced with having to comply with the challenges of remote compliance due to restrictions on mobility and need for social distancing.
The complexity of the regulatory landscape is a clear challenge to overcome even during non-pandemic times and for financially regulated businesses, Anti-Money Laundering (AML) and Know-Your-Customer (KYC) obligations must be met at all times.
5AMLD
The 5th Anti-Money laundering directive (5AMLD) was adopted and entered into force on 9 July 2018. EU member states had to implement these new rules into their national legislation by 10 January 2020.
6AMLD
The European Union’s Sixth Anti-Money Laundering Directive (6AMLD) came into effect for member states on 3 December 2020. Companies in EU member states that transposed it into national law will be sanctioned if they have not previously adapted to 6AMLD by June 3, 2021.
What EU member states are not obliged?
Member states had until 3 December 2020 to transpose the 6MLD into national law, however, in accordance with Recital 23 of the 6MLD, Ireland and the UK “are not taking part in the adoption of this Directive and are not bound by it or subject to its application”. The 6MLD has been adopted under Article 83 of Treaty on the Functioning of the EU (“TFEU”). Article 83 falls into Title V of the TFEU and Ireland has opted out of all laws made under Title V. For this reason, Ireland is not obliged to transpose the 6MLD into national law. In contrast, the 4MLD and 5MLD were adopted under Article 114 TFEU, Ireland had no opt out from that part of the TFEU.
How is 6AMLD different to 5AMLD?
The new 6th Anti-Money Laundering Directive (6AMLD) is different to the fifth directive in that it is focused on giving clarity on what offences fall into the category of AML. It also gives much tougher individual and corporate penalties for these offences. The aim is to clearly define money laundering offences and sanctions.
This Directive establishes minimum rules concerning the definition of criminal offences and sanctions in the area of money laundering. It also defines criminal offences and sanctions in the area of money laundering with a view to:
- facilitating police and judicial cooperation between EU countries; and
- avoiding that criminals take advantage of more lenient legal systems.
- aims to criminalise money laundering when it is committed intentionally and with the knowledge that the property came from criminal activity.
- allows EU countries to criminalise money laundering where the offender suspected or ought to have known that the property came from criminal activity.
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Highlights in the 6th Anti-Money Laundering Directive include:
Defining what is considered a “Money Laundering Offence“
Article 3 (1) of 6AMLD is a key change to note. It provides the newest definition of what constitutes a ‘money laundering offence’ and expands on the type of activity and conduct that is now punishable and deemed a criminal offence.
In Article 2(1) of 6AMLD twenty-two predicative offences are listed for member states to understand what exactly constitutes a criminal activity. At least one of these offences must be present to constitute a money laundering offence and an investigation of this.
In the list of twenty-two offences, cybercrime was officially mentioned for the first time in any AML directives, highlighting the importance placed on the role online activity has in money laundering and fraud.
Article 4 now includes accomplices who are “aiding and abetting” in money laundering offences and what penalties should be imposed on them, alongside the main parties.
Expanding on the liability of “Legal Persons”
Article 7 of the Directive aims to extend criminal liability to legal persons or the companies if someone in the company is found committing a money laundering offence or aiding and abetting in said offence:
“persons can be held liable where the lack of supervision or control by a person”.
Furthermore Article 8 in 6AMLD then specifies possible sanctions to impose that include criminal and non-criminal fines. An example of these sanctions even includes the temporary or permanent closure of the company.
Tougher penalties for individuals
The EU clearly wants to dissuade people from considering engaging with money laundering activity. In Article 5 under 6AMLD EU member States can now ensure that money laundering offences committed by an individual, or “natural persons”, are punishable by a maximum term of imprisonment of at least four years. This was previously just a one year.
Greater collaboration between member states
In Article 10 of the directive the focus is on establishing a jurisdiction looking to prosecute and convict regarding crimes covered in Article 3 and 4.
6AMLD wants EU member states to work together to be able to successfully prosecute and convict criminals engaged in money laundering activity.
Given the growing role of compliance and regulation in delivering secure digital experiences, collaboration between regulators, market-leaders and new solution providers will allow customers and clients to receive a premium experience and for a regulated business to remain compliant.
DOWNLOAD THE KEY POINTS OF THE 6TH ANTI-MONEY LAUNDERING DIRECTIVE HERE:
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