April 9, 2021

EU’s 6th Money Laundering Directive

The 6th money laundering (6AMLD) directive has already been in effect in EU member states since the 3rd of December, 2020 however financial institutions are mandated to implement it by the 3rd of June, 2021. The 6AMLD brings clarity to specific regulatory details to close loopholes, toughen penalties, and encourage greater cooperation. It empowers financial institutions and states to do more in the fight against money laundering and the financing of terrorism. Since there are only a few months left to the deadline, financial institutions need to ensure that they are familiar with the details of the 6AMLD and ensure that their compliance teams are ready to implement the associated changes.

What are the key changes in the 6AMLD?

  • It standardises the definition of money laundering across the EU. It has expanded the list of predicate offences to include 22 different crimes including certain tax crimes, environmental crime and cyber-crime, which now directly constitute money laundering.  
  • This would be the first time cybercrime is featured in this context in an EU money laundering directive. This list is intended to smooth out any existing loopholes in AML regulations that might allow criminals to avoid penalties and prosecution.
  • “Aiding, Abetting, Inciting and attempting to commit an offence of money laundering”, now constitutes money laundering itself. Before the 6AMLD, EU money laundering regulations focused only on those who profited directly from the act of money laundering, but under the new rules, so-called “enablers” will also be legally culpable.
  • Under the 6AMLD, criminal liability for money laundering has been extended to allow for prosecution and punishment of legal entities such as companies and partnerships. These legal persons shall also include individuals and businesses acting on the company’s behalf, for example, consultants, lawyers and accountants.
  • This is a marked difference from the past where only individuals could be prosecuted for money laundering offences.
  • The 6AMLD introduces a minimum prison sentence of 4 years for money laundering offences, increased from the previous 1 year.
  • Also, relevant authorities would be empowered to freeze or confiscate both the proceeds and freeze or confiscate the proceeds of the instrumentalities used in the commission of money laundering offences.
  • Corporate offenders would also be subject to sanctions including being disqualified from the practice of commercial activities, going under judicial supervision; or, the closure of the establishment which has been used for committing the offence.

What are the implications for organisations?

Organisations with ties to the EU need to review the 6AMLD in details to understand the new risk environment and to see if it has any impact on their operations.

Firms, especially those in financial services need to step up their KYC processes. An effective  compliance program not not just be a tick box exercise but rather follow best practice guidance. This includes:

  1.  The need to access to current databases such as credit agencies as well as utility records for verification purposes.
  2. Using appropriate screening tools to identify third party entries and individuals
  3. Due diligence must be conducted against a broader range of information including blacklist, politically exposed persons (PEPs), Sanctions lists, news sources for adverse media, financial information etc.
  4. Special attention must be paid to significant controllers and ultimate beneficial ownership of third party companies during screening.

Also, platforms such as the EBII Group’s Africa Compliance Hub (ACH) is a repository of the latest compliance news, regulations, sanctions as well as training opportunities.

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