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The cryptocurrency industry, like all regulated sectors, is
becoming more vulnerable to the risks of financial crime. Virtual Currency Exchange Platforms (VCEP’s)
and Custodian Wallet Providers (CWP’s) must take appropriate steps to assess
the risks of money laundering and terrorist financing within its business
This means that the cryptocurrency industry will need to
comply with the 6th Anti-Money Laundering Directive, applying “know your
customer” (KYC) and “customer due diligence” (CDD) checks on all new and
pre-existing customers. Alongside these measures there is an obligation to
apply enhanced due diligence (EDD) to transactions that are complex, unusual or
involve a Politically Exposed Person (PEP) or Special Interest Person (SIP).
In our latest blog, AML and Cryptocurrency experts at SmartSearch explore the intricacies of the 6MLD, the consequences of not
complying and how SmartSearch can simplify and guarantee your businesses
The EU applied the 6th Anti-Money Laundering Directive, on
3rd December 2020, which was to 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 were several key updates to be aware of, introduced by
6MLD, which we’ll run through below.
Harmonising the Definition of Money Laundering
6MLD saw 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
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.
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.
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.
If you’re part of a cryptocurrency and regulated company
which operates in the EU, then you’ll need to comply with the 6MLD. 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
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
To find out more visit our cryptocurrency webpage and see how we can help your firm become AML compliant
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 took effect on 3rd December 2020,
and must have been 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