On December 3, 2020, the Sixth Anti-Money Laundering Directive (6AMLD) took effect in the European Union, establishing corporate liability for money laundering for the first time in EU history. Companies now face severe sanctions, including confiscation of assets and seizure of business activity, if they are found liable for money laundering.
What is 6AMLD
6AMLD is the latest in a series of European AML directives aimed at preventing the EU financial system from being used for money laundering and terrorist financing.
6AMLD clarifies current regulations and sets common AML standards across Europe. In particular, the directive expands the definition of money laundering, specifies associated predicate offenses, and sets strict punishments for non-compliance.
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Who is impacted
The 6th Directive affects both individuals and businesses in all EU member states, with the exception of Denmark and Ireland. Since the UK is no longer part of the EU, it has not implemented 6AMLD, arguing that it’s national AML legislation provides the same level of scrutiny.
The scope of 6AMLD extends to a wide range of business activities, including banking, gambling, art trading, and real estate.
What about the previous AML directives
The First AML Directive came into force in Europe in 1991, criminalizing money laundering and establishing key practices like Customer Due Diligence and Suspicious Activity Reporting.
Over the next 30 years, the EU introduced four more directives—expanding AML requirements to include risk assessment, transaction monitoring, CTF practices, and much more. Each subsequent directive is a supplement to the previous one, forming the foundation for the 6th Directive to come.
For more insights into current AML requirements for European businesses, take a look at this article.
6AMLD: Key changes
Compared to other directives, 6AMLD does not require businesses to significantly update their AML procedures. However, there are two key changes that businesses should be aware of:
- A new definition of “money laundering”: The term now expands to the laundering of property as well as the acquisition, concealment, and distribution of all physical and virtual assets stemming from illegal activities, be it money, artworks, or real estate.
- An extended list of predicate offenses: The 6th Directive outlines 22 predicate offenses to money laundering (crimes that enable offenders to accumulate the funds to be laundered). Among them are terrorism, theft, and fraud, just to name a few. 6AMLD also introduces two predicate offenses to money laundering that are new to EU law—cyber and environmental crime. The latter includes the illegal wildlife trade, air pollution, and other crimes that impact the environment.
What do these updates mean for businesses?
How to comply
Businesses should update their AML procedures to align with the latest definition of money laundering as well as the new list of predicate offenses.
This means introducing systems that detect both money and property laundering stemming from all 22 predicate offenses (including environmental crime and cybercrime). To successfully mitigate associated ML risks, these systems should include:
- Enhanced transaction monitoring procedures;
- Improved Customer Due Diligence and adverse media screening;
- Compliance training for employees.
However, 6AMLD lays down only general compliance obligations. More specific requirements will be developed by individual member states and may vary. For instance, when the Netherlands implemented 5AMLD, their version was so rigid that it put the country’s crypto sector in crisis. Similarly, Germany goes far beyond the requirements of 6AMLD, as it considers handling of funds related to any crime—even minor ones—as money laundering and imposes strict punishments accordingly.
To ensure the best compliance, companies should monitor the legal section of their regulator’s website to see how their jurisdiction plans to transpose the new directive. We will be tracking the implementation of 6AMLD in EU-member countries and will publish the relevant updates on our website.
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Sanctions under 6AMLD
If previously only individuals could be punished for money laundering, now businesses can face sanctions if their employees commit or even attempt money laundering. These sanctions can be quite severe and include confiscation of business assets, exclusion from access to public funding, and even closure of a business.
The new rules additionally imply that if a company fails to implement effective AML policies, senior management may be held accountable for any resulting money laundering.
Also, 6AMLD makes liable not only persons who have laundered money but everyone associated with the crime. For instance, individuals who cooperated in hiding assets or who knew about money laundering but kept silent can now face punishment. For serious violations, prison sentences are set at a minimum of four years.
Deadlines
Member states had to integrate 6AMLD into their national laws by December 3, 2020. But there are countries that have missed this deadline. For instance, Cyprus has not even transposed 5AMLD, let alone the latest directive.
Under 6AMLD, businesses have a grace period for compliance that lasts until June 3, 2021. However, jurisdictions that fail to meet this deadline will probably have their own due dates, so it’s better to monitor those updates on the relevant regulator’s website.
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