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For all member states, the European Union’s 6thAnti-Money Laundering Directive came into effect on 3rd December
2020, and had to be implemented by every institution in the regulated sector by
3rd June 2021.
The previous directive – 5MLD – focused on
strengthening AML defences around cryptocurrency, high value goods and prepaid
cards. Contrastingly, 6MLD is designed to give financial authorities more power
to fight money laundering and financial crime. This latest directive harmonises
the definition of money laundering, expands the number
of offences considered under this umbrella, and also authorises tougher
punishment for those involved.
Since the UK officially left the European Union on
31st January 2020, it’s no longer obliged to comply with EU money
laundering directives, so the British government has opted out of 6MLD. That
said, the UK’s domestic AML regulations are widely
considered to be largely compliant with the requirements laid out in 6MLD, and
in some instances even supercede them.
While UK businesses aren’t legally obligated to
enforce the recommendations put forth in 6MLD, their AML compliance measures shouldn’t be
that different to those of companies elsewhere in Europe. The UK’s Ministry of
Justice is reviewing domestic money laundering regulations to ensure they’re up
As well as this – in anticipation of leaving the
EU – the UK brought in the Money Laundering and Transfer of Funds Information
(Amendment) (EU Exit) Regulations in 2019. In this legislation, it’s
determined that the AML regime in the UK should effectively mirror any future
directives set out by the EU – but will remove any direct references to
specific European institutions. Indeed, several months on from the deadline for
6MLD and the UK’s approach to AML compliance still looks very similar to that
of the EU, and we expect it will continue to do so for the foreseeable future.
6MLD may not apply to businesses operating
solely in the UK, but firms which trade in Europe too still need to adhere to
EU AML regulations. With that in mind, UK businesses operating overseas are
advised to ensure their compliance measures are brought in line with 6MLD.
As we mentioned earlier, 6MLD aims to empower the
relevant authorities and institutions to take greater action in instances of
financial crime. There are four key takeaways to consider, which can be
summarised as follows:
A harmonised definition for money laundering.
In the EU’s 6th AML directive, the
definition of money laundering is harmonised, so that it’s consistent across
all member states. In fact, 6MLD laid out 22 different predicate offences –
including environmental crime – all of which now constitute money laundering. Cybercrime
was also included in this list; the first time this particular offence has been
formally featured in an EU directive. Here are all 22 of the predicate
Racketeering, or participating
in organised crime groups
Human trafficking or migrant
Trafficking narcotic drugs and
Trafficking stolen goods
Kidnap or hostage-taking
Counterfeiting and pirating
Tax crimes, with either direct
or indirect taxes
On top of this, aiding and abetting any of these
crimes can now also be considered a money laundering offence, and may result in
the same legal consequences.
Changes to criminal liability.
Before 6MLD came into effect, only individuals
could be prosecuted for money laundering, but this sixth directive expands the
scope of criminal liability to include “legal persons” – like organisations,
companies and partnerships. This means whole firms can now be considered liable
for a handful of staff who facilitated money laundering of financial crime, as
the business itself failed to prevent it.
By making companies more culpable for the
behaviour of their employees, this change aims to make businesses in the
financial services sector do more to combat money laundering. In light of this,
many firms have strengthened their risk-based approach, doubling down on
elements of AML compliance like KYC and KYB checks, sanctions screening and ongoing
Tougher punishments for money laundering offences.
When 6AMLD was introduced, the punishments for
money laundering offences also got more severe. For example, the minimum prison
sentence for money laundering in member states quadrupled from just one year to
four. It’s worth noting that many countries implementing 6MLD already upheld
longer prison sentences than the minimum required by previous directives, and in
the UK, the maximum sentence for money laundering is 14 years.
Cooperation amongst member states.
In money laundering cases, there’s often the
issue of dual criminality. This is when an initial money laundering offence
occurs in one place, and then a secondary offence is carried out somewhere
else; for example, the money is moved to a different country to be “washed” or disguised.
Financial crime like this requires cooperation between member states, so that
they can assist one another in identifying the illegal proceedings.
6MLD therefore calls for member states to have
formal collaborative processes, and introduces a range of compulsory
requirements for information sharing. The sixth directive also lists the
different factors relevant authorities should take into account, when they’re
deciding where and how to prosecute a case with dual criminality.
The 6th Anti-Money Laundering
Directive came into effect in 2021, but a 7th MLD could be on the
horizon as soon as 2022. Whether you run a small accounting company, or you’re
part of a multi-national finance conglomerate, keeping up with the consistent
evolution of money laundering recommendations can be a daunting task. With the
regulatory goal posts moving every few years, adapting your risk-based approach
so reactively is often difficult to sustain. That’s where SmartSearch can help.
offer an all-in-one AML solution, powered by data from industry-leading sources
like the Dow Jones
Watchlist. With the SmartSearch platform, you can carry out accurate
checks on both businesses and individuals, in the UK or overseas,
and get a clear pass or fail result in seconds. Our expert team is on hand to
help you shape your AML compliance strategy, and protect your business from
financial crime, money laundering and fraud.