The 6th Anti-Money Laundering Directive – what does this mean for the world of cryptocurrency?

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 activities.

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 compliance.

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.

1.       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 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 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 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.

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