Unlock Our Latest Cutting-Edge Source of Funds Solution --> Discover more
New: 2024 Money Laundering and Financial Crime Report --> Read the full report
We're a multiple award-winning firm and one of the fastest-growing tech companies in the UK - find out how we got to where we are today.
We are always looking for talented individuals to join our growing team - if you are highly motivated with a positive attitude we want to hear from you.
Discover the latest events we will be hosting, exhibiting, and attending, where you can learn more about our industry-leading digital compliance solutions.
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 to scratch.
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:
1. 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 offences:
Terrorism
Corruption
Fraud
Sexual exploitation
Racketeering, or participating in organised crime groups
Human trafficking or migrant smuggling
Trafficking narcotic drugs and psychotropics
Trafficking stolen goods
Trafficking arms
Smuggling
Robbery
Murder
Kidnap or hostage-taking
Counterfeiting currency
Counterfeiting and pirating products
Forgery
Piracy
Extortion
Tax crimes, with either direct or indirect taxes
Insider trading
Cybercrime
Environmental crime
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.
2. 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 monitoring.
3. 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.
4. 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.
We 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 KYC 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.
