By this time next year the EU will have enforced a new law to fight money laundering. Are you ready?
As names go, the Sixth Anti-Money Laundering Directive (6AMLD) gets straight to the point about what it is about.
Originally announced in October 2018, 6AMLD is the sixth update to the EU’s anti-money laundering (AML) laws, responding to the growing risks of fraud, money laundering and financing of terrorism.
Member states have until December 3, 2020 to introduce the new regulations into their national laws.
After that, financial firms have another six months, until June 3, 2021, to prove that they are living up to the new standards.
Given the proliferation of money laundering scandals like the €200bn being funnelled through Danske Bank, it is no secret why this legislation has been put into place.
“There seems to be no let-up in news stories regarding new money laundering cases being reported,” Mike Hampson, CEO of Bishopsgate Financial, the financial consultancy, tells RegTech Analyst. “The fact that we are seeing yet another update to the regulations in the form of [6AMLD] clearly shows that regulators still believe that the regulations need to tighten further still.”
So what does the new rules entail?
A spokesperson from Electronic IDentification, the biometrics identification company, which has written a whitepaper about the old 5AMLD, tells RegTech Analyst that 6AMLD will mean a lot of obstacles to overcome for financial services.
“6AMLD represents a suite of challenges for companies in terms of adoption and process changes,” the spokesperson says. “In [times rife with volatility, uncertainty, complexity and ambiguity], where the only certainty is change, companies must be prepared for what is yet to come, whatever it is.”
With the China-US trade war showing no sign of slowing down and the Brexit saga still having no end in sight, leading to people questioning whether or not the UK will remain a FinTech hotbed in the future, one can safely argue uncertain times are here.
But, just like with any new piece of regulation affecting financial firms, 6AMLD also creates opportunities for RegTech entrepreneurs. “RegTech companies are helping businesses deal with these present-day challenges and to be compliant with the different AML regulations,” says the Electronic IDentification spokesperson.
“This expert and specialized businesses use their knowledge and experience in order to power and secure their clients’ activities. They offer a skilled and proficient backing not only to adapt to new AML regulations like 6AMLD but to be updated and aware of the permanent changes, [they are] also taking advantage of the new technological advances.”
Among other things, Deloitte lists six key differences between the old and the new legislation: a unified list of predicate offenses, more money laundering offenses, extended criminal liability to legal persons, tougher punishments, increased international co-operation for prosecution, and new requirements for dual criminality for specified offenses.
Let’s start at the top with the list of unified predicate offences, small crimes that are components of bigger crimes.
6AMLD lists 22 specific predicate offences that the EU’s member states have until December 2020 to put into their legislation. This list includes environmental offenses, cybercrime, and both direct and indirect tax offences. Moreover, 6AMLD will also harmonize the definition of other predicate offenses such as tax crime, human trafficking and insider trading.
When it comes to new criminal offenses, aiding and abetting, attempting and inciting money laundering will become illegal under the new EU directive.
The extended liability of legal persons is one of the areas where financial institutions and RegTech companies in particular should take head.
Why? Because the 6AMLD changes will mean that companies and the decision makers working in them will face more liability for criminal offenses happening under their watch.
“It states and specifies that legal persons must be believed liable in conditions where a ‘lack of supervision or control’ by a character with a ‘leading position’ has made possible the act of laundering crimes,” the Electronic IDentification spokesperson explains. “That is why high-security compliant online identification processes are so important for companies.”
Not only are legal persons and their representatives becoming liable for offenses happening in or through their companies, they may face harsher punishments for it as 6AMLD raises the minimum prison sentence from one to four years.
The stronger punishments also includes the risk of being banned from conducting business, permanent or temporary closure of an establishment and exclusion form public benefits.
The EU directive pushes for more collaboration across borders within the EU. It also creates the opportunity to prosecute predicate crimes happening in another country that led to money laundering even if those offenses were not criminalized in that nation. Those offenses are participation in an organised criminal group and racketeering; terrorism, trafficking in human beings and migrant smuggling, sexual exploitation of both adults and children, illicit trafficking in narcotics and psychotropic substances, and corruption.
Copyright © 2018 RegTech Analyst