6AMLD: Are we there yet?

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Money laundering (ML) is a crime with an increasing focus on it at the moment, and governments are starting to take harsher measures to ensure compliance with anti-money laundering (AML) rules. In 2019 Standard Chartered Bank was fined £102 million by the Financial Conduct Authority (FCA) for AML breaches (the second largest financial penalty it has handed out for AML breaches), almost a year on from that fine and Europe has another addition to their AML rules.

The 6th anti-money laundering directive (6AMLD) - and yes, there is a 6th one - will now need to be considered by businesses, just as they have finished sorting-out their compliance with 5AMLD. The 6AMLD requires Member States to bring into force the laws, regulations and administrative provisions necessary to comply with 6AMLD by 3 of December 2020, so it is something that businesses will need to start to give attention to. Whereas 5AMLD focussed on introducing a range of new compliance obligations, 6AMLD focusses more on the definitions and categorisation of crimes around ML, the sanctions available for ML and the cooperation between EU member states when dealing with ML cases. Each of the areas focussed on by 6AMLD will be discussed below.

The ‘Money Laundering Offence’ Cleaned Up

Firstly, 6AMLD defines what ‘criminal activity’ is, listing 22 criminal activities. These 22 criminal activities include new activities, such as environmental crime and cybercrime. These show that the EU is looking to adapt the ML rules in order to keep up with an ever changing criminal environment, cybercrime in particular is becoming increasingly prevalent in a world driven by technological change.

Article 3(1) of the 6AMLD defines what constitutes ‘money laundering offences’. They have a list of conduct that (when done intentionally) will be considered a money laundering offence, and includes, among others, conduct such as “the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from criminal activity”. Article 3(2) ensures that conduct in Article 3(1) will be punishable where the relevant person “ought to have known that the property was derived from criminal activity”, this means that ,where a reasonable person should have known that criminal activity was involved, ignorance cannot be a defence. Self-laundering is also specifically mentioned as being an offence.

Article 4 states that inciting, aiding and abetting, and attempting a money laundering offence under Article 3 will constitute a criminal offence itself. Meaning that accomplices to ML are guilty of an offence as well.

The aim of listing and specifying all the criminal activity and money laundering offences is an attempt to have a harmonised AML system for all the member states of the EU.

New Sanctions and Penalties Under 6AMLD

There has been an increase in the penalty requirements under 6AMLD. Specifically the increase means that self-laundering and money laundering offences under Article 3(1) may be punishable by 4 years imprisonment. 6AMLD also specifies that member states must “ensure that the offences referred to in Articles 3 and 4 are punishable by effective, proportionate and dissuasive criminal penalties”. This increase in penalties shows a commitment by the EU to take a harsher stance on ML activities.

Article 7 sets out the liability for legal persons concerning ML offences, while Article 8 sets out the sanctions member states must have in place for those legal persons that breach the AMLD. With these Articles legal persons are now able to be held criminally liable for ML offences in article 3(1) and (5) as well as Article 4. So if a relevant person commits a ML offence, or acts as an accomplice to a ML offence, for the benefit of the legal person, that legal person may now be found criminally liable.

This means that there are much harsher sanctions and penalties for legal persons, which may include; exclusion from entitlement to public benefits or aid, temporary or permanent exclusion from access to public funding, including tender procedures, grants and concessions, temporary or permanent disqualification from the practice of commercial activities, placing under judicial supervision, a judicial winding-up order or temporary or permanent closure of establishments which have been used for committing the offence.

The extension of criminal liability to legal persons is a further example of how the EU is committed to combating ML, it also shows their commitment to a harsher stance on ML offences.

EU Cooperation

With the extraterritorial scope of ML activities the 6AMLD has aimed at increasing the cooperation between EU member states when a ML offence occurs over multiple jurisdictions. Specifically Article 10(3) states “Where an offence referred to in Articles 3 and 4 falls within the jurisdiction of more than one Member State and where any of the Member States concerned can validly prosecute on the basis of the same facts, the Member States concerned shall cooperate in order to decide which of them will prosecute the offender, with the aim of centralising proceedings in a single Member State.”

This cooperation is important because of the nature of ML allowing it to easily occur over various border lines. Further, under Article 3(3)(c) the money laundering offences listed will extend to property that has been “derived from conduct that occurred on the territory of another Member State or of a third country, where that conduct would constitute a criminal activity had it occurred domestically”, this means that even where an activity is not an offence in a country where it occurred, it may still be considered a criminal offence for ML purposes.

A point of interest is that the UK has not opted-in to 6AMLD stating that “The UK’s domestic legislation is already largely compliant with the Directive’s measures, and in relation to the offences and sentences set out in the Directive, the UK already goes much further.” The way the two regimes develop in the future will be interesting to follow.

So are we there yet?

The 6AMLD is a necessary piece of the AML laws of the EU, it begins to harmonise the different jurisdictions into one understanding of what constitutes ML. Further it increases the possible penalties and sanctions for offenders, taking a much harsher stance than previously taken. With the rapid globalisation of the world, and financial institutions becoming increasingly interconnected, a more organised, harmonised and defined anti-money laundering regime is needed, which is what 6AMLD is looking to help achieve. However, the ever changing and developing World brings with it criminal activities that develop along with it. Therefore the EU will need to continually update and address any changing needs they may have with regards to ML, so while the current gaps are being filled, there may be more loopholes developing.

How Can We Help?

RiskSave can assist you in understanding how the changes to the AML regime may affect you, and help you put in place policies to ensure ongoing compliance.