The 6th Anti-Money Laundering Directive (6AMLD) is arguably the toughest measures the European Union has ever put forward to crack down on financial crimes and to deter money laundering.The European Parliament and the European Commission drafted a proposal in September 2018 to create stronger, 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), is led and overseen by the European Banking Authority (EBA).EU member states had until 3 December 2020 to transpose 6AMLD into national law, and the regulated entities are needed to implement relevant regulations by 3 June 2021.
THE 22 PREDICATE OFFENCES INCLUDE –
(A) ORGANISED CRIMINAL GROUP AND RACKETEERING, (B) TERRORISM, (C) HUMAN TRAFFICKING AND MIGRANT SMUGGLING, (D) SEXUAL EXPLOITATION, (E) ILLICIT TRAFFICKING IN NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES, (F) ILLICIT ARMS TRAFFICKING; (G) ILLICIT TRAFFICKING IN STOLEN GOODS AND OTHER GOODS; (H) CORRUPTION, (I) FRAUD, (J) COUNTERFEITING OF CURRENCY, (K) COUNTERFEITING AND PIRACY OF PRODUCTS; (L) ENVIRONMENTAL CRIME, (M) MURDER, GRIEVOUS BODILY INJURY; (N) KIDNAPPING, ILLEGAL RESTRAINT AND HOSTAGE-TAKING; (O) ROBBERY OR THEFT; (P) SMUGGLING; (Q) TAX CRIMES RELATING TO DIRECT AND INDIRECT TAXES, (R) EXTORTION; (S) FORGERY; (T) PIRACY; (U) INSIDER TRADING , (V) CYBERCRIME,
6th AML DIRECTIVE CHANGES
Harmonized definition: 6AMLD provides a harmonized definition of what constitutes a money laundering offence.The 22 predicate offences that are outlined in 6AMLD truly reflect the changing nature of the money laundering landscape, and now include offences such as cybercrime, insider trading, and environmental crime.
Extension of criminal liability: 6AMLD also includes “aiding and abetting” and “attempting and inciting” money laundering as crimes, which means that criminal liability will now be extended beyond those who actually commit the crime. It has now been extended to include legal persons (ie. companies or partnerships). Now qualifies business leaders to experience penalties themselves.
Tougher punishments: Amended the maximum imprisonment for money laundering offences from one year to four. Additionally, any sentence may be supplemented with sanctions and fines (up to €5 million), including the complete shut-down of a business.
Cooperation: EU member states are now required to cooperate with one another in the prosecution of money laundering crimes.
The UK will not transpose 6AMLD into their domestic AML framework enmark have confirmed that they will not be adopting 6AMLD due to the terms of their agreement with the EU
THESE ARE THE KEY POINTS AND MAJOR CHANGES OF 6TH ANTI-MONEY LAUNDERING DIRECTIVE. TO UNDERSTAND AND GET A CLEAR LOOK ON HOW FAST THE WORLD OF FINANCE HAS UPDATED IN AN YEAR,GIVEN BELOW ARE THE KEY POINTS AND CHANGES MADE IN 5TH ANTI-MONEY LAUNDERING DIRECTIVE.
Cryptocurrencies : For the first time that crypto service providers were classified as obliged entities.
- They have to conform to the same AML and CTF requirements as mainstream financial institutions.
- Additionally, any crypto platforms and wallets need to register with their local authority.
Financial Intelligence Unit (FIU) : Gave the FIU sweeping powers, including the ability to obtain the addresses and identities of cryptocurrency holders.
High risk third countries : Companies that do business with customers from high risk third countries (such as Iraq, Syria, and North Korea) are required to perform enhanced due diligence measures under 5AMLD. It is required to obtain approval from senior management prior to establishing or continuing business relationships with clients in high risk third countries.
5AMLD : Announced in June 2018 and introduced a number of important changes for businesses servicing European clients. Following are some key issues and changes in 5AMLD.
Politically Exposed Persons (PEPs) : A politically exposed person (PEP) is an individual who is or has been entrusted with a prominent public position.
- Now treated as high risk individuals regardless of where they are located.
- 5AMLD requires that EU member states create and publicly release a functional list of PEPs.
Ultimate Beneficial Owner (UBO)-: UBO refers to the person or entity ultimately benefiting from the business relationship.
- Businesses will now need to establish who is ultimately controlling and benefiting from the business relationship.
- 5AMLD emphasizes the importance of keeping up to date records on UBOs.
THE FUTURE
Organizations will need to review and update their existing AML processes.
The potentially mammoth task this represents, many organizations are turning to third party regulatory screening solutions to save time and money.
Instead of just focusing on what is needed to be compliant with 6AMLD, companies should take a more proactive approach when it comes to compliance in general.
Doing the bare minimum is no longer acceptable when it comes to AML compliance. compliance should be seen as a priority and a way to dominate the market. By establishing that your company has the systems in place to quickly and easily adapt to changing regulatory requirements, you are ensuring that you can be the first to market with new services and products while minimizing overall risk.
CONCLUSION
Businesses should focus on a more proactive approach when it comes to compliance.it is likely that 7AMLD isn’t that far off.
Regulations are only going to become stricter and be updated more often.
It’s important that organizations broaden their horizons. it is necessary to look to the future and see compliance as an opportunity to achieve a higher level of governance to set yourself apart.
Reference & Credit:
1.https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2018.284.01.0022.01.ENG
2. https://kyc-chain.com/6amld-the-next-big-thing-in-aml-regulation/
3. Images-https://unsplash.com/s/photos/
4. https://hellosoda.com/blog/understanding-6amld-risk-to-business/
About the Summary writer
Viswa Teja Bapireddy is an intern with Crossbar Financial Crime Academy. A young, enthusiastic student of Birla Institute of Technology & Science, Pilani, Viswa Teja is specially passionate about the Financial Crime Compliance Domain and likes reading, researching writing and sharing blogs / stories in this domain.