Updated: Aug 4
The 6th Anti-Money Laundering Directive (“AMLD6”) that focus on establishing a standardized approach by Member States to money laundering practices, besides expanding the scope of potential liability for money laundering practices and the severity of sanctions that Member States are required to impose under their local law has entered into force at a bloc-wide level by 2 December 2018, and Member States are required to implement the new Directive by 3 December 2020.
Difference of AMLD6
AMLD6 differs from AMLD4 and AMLD5. AMLD4 established principles in terms of broadening the extent of obliged entities whilst AML5 defined enhancements around ultimate beneficial ownership (UBOs) and politically exposed persons (PEPs). AMLD6 advances the norms that are already established in AMLD5. AMLD6’s main aim is to reduce the gap in Know-Your-Client (KYC) – Anti Money Laundering (AML) between the EU and the United Kingdom. Since the United Kingdom has left the EU, it has chosen to opt out of AMLD6 due to the reason that protections provided by the English Law are already compliant with the Directive in most parts. AMLD7 is expected to bring a Single Financial Intelligence Unit with it to ensure a bloc-wide effective anti-money laundering practice.
Since EU Directives are required to be transposed to national laws of the Member States to be applicable, the sixth Directive is not effectively being implemented so far. Nevertheless, most businesses do not wait for the regulators to transpose and start compliance by themselves or start building the structure at least to effectively mix their risk appetite with the requirements in AMLD6 for ensuring an effective risk assessment.
Key Amendments Introduced
The primary key amendments introduced by the AMLD6 is as below:
Automation of KYC Procedures and transaction monitoring
AMLD6 requires obligated organizations to develop automated procedures to comply with AML6 requirements. From now on it is a must to develop the necessary technological capacity for conducting customer due diligence. This can vary from biometric verification to types of systems for document verification. As it can be outsourced tools it can also be additional video checks of clients. Also, adverse media checks can be a part of this. This will not only help to conduct effective due diligence free from flaws of a human employee but also be a deterrent to those who want to launder money through the systems of the obliges. Automation also ensures the adoption and implementation of time-proof procedures since old-fashioned practices conducted by employees are now being done by algorithms.
Adverse media screening
None of the Directives has mentioned the adverse media checks on clients. However, all six Directives including AML6D introduces the obligation to enforce a wider risk assessment. A wide risk assessment would inevitably include some form of adverse media screening otherwise you could not materially determine the risks that are posed to a business. Organizations may still comply with the AMLD6 without adverse media screening practice however they will fail to carry out an effective risk assessment.
Detecting aiding and abetting of money laundering
These were are already implemented practices. Acts of aiding, inciting, and predisposition to money laundering offenses also constitute aggression and are punishable as a criminal offense. Organizations are expected to be able to detect aliases who may potentially be helping money launderers. This is required to be like a regular part of their client screening processes.
Identifying New Risks
AMLD6 identifies 22 new predicate offenses and points out to users of virtual currencies as a new risk as well. Even though some of the crimes may seem irrelevant at first glance in the case where those crimes are financially motivated, then the risk of funds generated being tried to be laundered through the oblige shall be assumed. These new crimes range from human trafficking and terrorism to tax crimes and even environmental crimes. Wildlife trafficking practices are an example of environmental crimes that are committed with financial motives and pose a higher risk of money-laundering attempts.
In order to deter money laundering throughout the Union, Member States are required to ensure that it is punishable by a maximum term of imprisonment of at least four years. This sub-article sets the minimum penalty for crimes related to money laundering. Similarly, economic sanctions rise to 5 million euros (and their equivalents in other currencies). AML6 also encourages authorities to impose exemplary sanctions.
The sixth Directive brings liabilities for legal persons which is attributed to company executives and employees. 6AMLD requires the Member States to set the necessary legal standard to held legal persons accountable for the mandated offenses where a person with a leading position within a legal person commits the offense for the benefit of the legal person provided that such person has a leading position if he or she has; a power of representation of the legal person; authority to make decisions for the legal person; or authority to exercise control within the legal person. AMLD6 also requires the Member States to take the necessary measure to ensure that legal persons can be held liable where the lack of supervision or control by a person has made possible the commission of any of the offenses for the benefit of that legal person by a person under its authority (any employee or representative).
Sanctions For Legal Persons
6AMLD requires Member States to have effective, proportionate, and dissuasive penalties for corporates held to be liable under local law, including criminal or non-criminal fines. 6AMLD also enumerates some of the penalties that national laws may provide such as:
i. exclusion from entitlement to public benefits or aid;
ii. temporary or permanent exclusion from access to public funding, including tender procedures, grants, and concessions;
iii. temporary or permanent disqualification from the practice of commercial activities;
iv. placement under judicial supervision;
v. a judicial winding-up order;
vi. temporary or permanent closure of establishments that have been used for committing the offense.
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