The EU has announced its 6th Anti-Money Laundering Directive, which is due to come into effect on 3rd December 2020, and must be enforced by all regulated financial institutions six months later, by 3rd June 2021. This follows 5MLD, which was implemented in January 2020.
Enabled by Brexit, the UK government has chosen to opt out of enforcing compliance with 6MLD, on the basis that domestic legislation is already up to scratch, and even ‘goes much further’ than what is recommended in the EU’s Anti-Money Laundering Directives. However, any regulated UK businesses in the financial sector who operate in Europe must still comply with changes set out in 6MLD.
There are several key updates to be aware of, introduced by 6MLD, which we’ll run through below. Need more context on 5MLD first? Read more about the 5th Anti-Money Laundering Directive over on the SmartSearch blog.
1. Harmonising the Definition of Money Laundering
6MLD will see a more specific, harmonised definition of money laundering. This directive has expanded the list of predicate offences (offences which are part of a larger crime) to include 22 different crimes, which now directly constitute money laundering. This list is intended to iron out any existing loopholes in AML regulations which might enable criminals to avoid penalties and prosecution. This list includes crimes like self-laundering, cybercrime, aiding and abetting money laundering and many others.
2. Changes to Criminal Liability
Until 6MLD, only singular people could be punished for money laundering, but this new EU money laundering directive will extend criminal liability to cover any legal persons involved – like partnerships, companies and more. For example, if a legal person did not act to prevent illicit proceedings being carried out by someone senior within an organisation, they could be charged and convicted. This change is intended to force a greater level of accountability within financial organisations.
3. Clamping Down with Tougher Punishments
This is a further measure intended to deter financial crime. 6MLD dictates that all member states must now set the minimum prison sentence for anyone found guilty of money laundering to four years – where it had previously been just one year. This latest directive also grants judges in member states increased powers with regards to money laundering, as they can now prevent organisations from accessing state funding, and issue fines to individuals.
4. The Involvement of Member States
The EU’s 6th Anti-Money Laundering Directive also encourages collaboration between member states, in relation to the handling of money laundering offences. For instance, if a money laundering operation is taking place over two different countries, both of which are member states, then these two countries should work together going forward to identify the illegal proceedings, then prosecute and convict the criminal in question.
SmartSearch and 6MLD
If you’re part of a company which operates in the EU, then you’ll need to be ready for the introduction of 6MLD in 2021. Ensuring your business is audit-ready at all times, SmartSearch offers a comprehensive selection of AML services, including KYC checks, adverse media searches, sanctions screenings and more – all accessible via one convenient platform. Plus, the database we use to carry out these checks provides both domestic and international coverage, so it’s ideal for businesses with dealings in Europe.
Our range of intelligent AML products will guarantee your compliance with the latest AML regulations, and ensure you’re always operating within the guidelines from the FCA and the FATF, so you can focus on what matters.
Frequently Asked Questions
What are AML regulations?
AML regulations are the laws and legislation put in place around the world in an attempt to prevent money laundering from taking place. They may vary across the globe, according to the financial authorities in each continent or country. In the UK, businesses are legally obliged to comply with AML regulations set out by the FATF, and follow guidelines from the FCA.
When is 6MLD taking effect?
The 6th Anti-Money Laundering Directive from the European Union will take effect on 3rd December 2020, and must be implemented by all relevant financial institutions 6 months later, by 3rd June 2021.
What is the 5th Anti-Money Laundering Directive?
The 5th Anti-Money Laundering Directive came into effect on January 10th 2020, and included several key updates to the pre-existing EU directives. There were two primary objectives of 5AMLD: to stop the financial systems in member states being exploited by criminal activities, and increase the transparency around areas such as cryptocurrency and high value goods, to make it harder for criminals to conceal illicit transactions.