6AMLD of EU - A Detailed Insight

6AMLD of EU – A detailed insight

European union’s another anti-money laundering directive is in the pipeline. And this time the union is aiming for uniformity in AML/CFT practices across member countries while keeping up with changing international regimes.

The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion. And in the EU money laundering accounts for up to 1.2 % of the EU’s annual GDP, or around $225.2bn (€197.2bn) in 2018, according to a 2017 report by Europol.

Recently the 5AMLD was implemented on 10 January 2020. The fifth directive mainly targeted loopholes in certain sectors. It addressed the loopholes in prepaid cards, virtual assets, and precious metal dealing. The major change that came due to 5AMLD is that the identity verification threshold for prepaid cards is reduced from €250 to €150. This threshold for remote transactions is €50. 

Now the 6AMLD is in the next big change in the AML/CFT regimes of the EU. The member states are required to integrate the new directive into their national laws by December 2020 and the reporting entities are required to completely implement the new laws by June 2021. The new directive is drafted well to close any left loopholes in AML/CFT regulations.

Key Features of 6AMLD

The 6AMLD is not only about fulfilling minimum regulatory requirements but about changing the attitude towards AML/CFT. The reporting entities need to go another mile to play their role in eliminating money laundering.

Key Features of 6AMLD

1. A list of predicate offences

A list of 22 predicate offences is provided in AMLD6. It includes offences related to environmental crime, cyber crimes, tax crime, and self-laundering. The directive includes ‘aiding and abetting’ and ‘attempting and inciting’, which means that criminal liability will be extended to people or businesses that are used in the criminal offence. Businesses will be liable for penalties if money laundering is channeled through their system due to a lack of preventive measures. 

The offenses are clearly defined in the official journal of the 6AMLD. The reason behind this measure is to create uniformity in the AML/CFT measures of member states. Because lack of uniformity is one of the major reasons behind money laundering scandals in EU member states. 

2. Increase in non-compliance penalties

The 6AMLD has clearly defined the penalties for businesses and individuals. 

Natural persons 

The individuals involved in money laundering are called “natural persons” in the 6AMLD. Non-compliance penalty is increased for the natural persons. Now a sentence of four years is non-compliance penalty, it was one year previously. As mentioned in the official journal

In order to deter money laundering throughout the Union, Member States should ensure that it is punishable by a maximum term of imprisonment of at least four years.”  

Also, the monetary fine is increased to five million Euros. 

Legal persons 

Businesses are described as “legal person”. In case a business is found to be a part of a financial crime due to lack of AML measures or negligence it will be liable for these below-mentioned penalties:

  • Exclusion from entitlement to public benefits or aid
  • Permanent or temporary disqualification to perform commercial activities
  • Judicial winding up
  • Temporary or permanent closure
  • Placed under judicial supervision

3. “Aiding and Abetting” and “ inciting and attempting” 

The scope of AML regulations is increased to” aiding and abetting” and “ inciting and attempting”. The 6AMLD official journal clearly states, “Member States shall take the necessary measures to ensure that aiding and abetting, inciting and attempting an offence referred to in Article 3(1) and (5) is punishable as a criminal offence.”

4. Alignment with international laws

The Journal states that the member countries are required to implement the 6AMLD while keeping their AML/CFT laws aligned with international laws. It will increase transparency in financial infrastructure. 

This means the reporting entities (businesses/ legal persons) will be required to follow the new regulations that will be aligned with international regimes.

5. FATF recommendations EU AML laws

The 6AMLD will require the member countries to align AML laws with the FATF recommendations. The tax crimes are defined as a criminal offence and the preventive measures are required to be designed in light of revised recommendations of FATF. 

6. Not missing on the virtual currencies

The sixth anti-money laundering directive requires the member countries to take concrete steps towards elimination of risk coming with these virtual assets. The reporting entities such as crypto exchanges, digital asset exchanges, cryptocurrency dealers, crypto wallet providers and businesses accepting cryptocurrency payments will be facing some major AML/KYC compliance scrutiny in 2021. 

How businesses should prepare for the change?

The ultimate effect of changing regimes is on the businesses. The new directive is drafted to change the perspective of businesses towards AML/CFT compliance. The new regulations of “Aiding and abetting”, and “ inciting and attempting” have changed the compliance requirements. Businesses will be liable for heavy penalties if they’re found to be involved in the criminal offence. Even if they’re used as a tool or a channel. 

The reporting entities are required to have an in-depth understanding of the risks and threats and to take necessary steps to eliminate the risk of any of the listed criminal offences being channeled from their platform. 

The businesses are expected to have a completely updated setup for compliance requirements. Digital identity screening could prove to be a reliable partner of the businesses in this regard. As it provides global coverage in the screening of individuals and businesses it helps reporting entities maintain a global risk cover against bad actors.

Find more relevant resources:

6AMLD of EU – A detailed insight

AML Technology Eradicating the Perils of Money Laundering

AML Technology Eradicating the Perils of Money Laundering

In the past few years, we have seen a substantial increase in the number of legislations regarding how legal entities especially financial institutions combat financial crimes like terrorist funding, money laundering, and identity theft. A report estimates that in 2009, criminal proceeds amounted to 3.6% of global GDP, with 2.7%  (or USD 1.6 trillion) being laundered. Businesses are in dire need of KYC and AML compliance to fight back all such frauds. Business owners are deploying various measures against scams but the AML compliance program is effective out of all. 

AML compliance program is basically a methodology that defines the role that governs how a company monitors accounts, detects and reports financial crimes to relevant authorities. AML screening tackles with the intrinsic money laundering risks the company faces or can face in the future. The role of legislation is crucial in order to know how the AML compliance program should work. Customer screening for anti-money laundering is for completing due diligence to prevent and deter money laundering, terrorist financing, and other financial crimes and frauds. 

Why AML Compliance?

AML( Anti Money Laundering) practices have been used for businesses around the globe and all regions require the businesses to perform due diligence on their customers in one way or the other. AML compliance is not as difficult for organizations to follow as it seems. An investment of a few thousand dollars can obviously demit the loss of millions in penalties that businesses will have to pay eventually. 

To detect suspicious transactions and analyzing customer data, Anti-money laundering AML screening has been employed by financial institutes and other businesses. To filter customer data and classify it according to the level of suspicious and inspect it for errors is done by AML systems. Any sudden and substantial increase in funds or a large withdrawal of cash includes such anomalies.  AML checks are not for money laundering but also put a tight reign on frauds like tax evasion, terrorist financing, etc. AML compliance has a system to report money laundering activities to relevant authorities evaluating the client’s risk profile. 

Artificial Intelligence Enhancing AML Checks:

 

Artificial intelligence (AI) has the potential to transform financial institutions (FIs), disrupting every aspect of financial services, from the customer experience to financial crime. AI technology can be utilized by FIs in a number of ways, with anti-money laundering (AML) one of the main areas of focus. FIs can employ AI to analyze large amounts of data, to filter out false alerts and identify complex criminal conduct. It can identify connections and patterns that are too complex to be picked up by straightforward, rule-based monitoring or the human eye.

FIs are awakening to the potential of AI, both internally and externally, and beginning to embrace it. According to the Digital Banking Report, 35 percent of financial organizations have deployed at least one machine learning solution. Artificial intelligence has the ability to completely transform how banks perform AML and Know Your Customer (KYC) compliance. Additionally, for this need of anti-money laundering, artificial intelligence systems are capable to mine a great volume of data to prevent risk, which simplifies the process of identification of high-risk clients.

 AI is crucial when performing repetitive tasks, saving a lot of valuable time, resources and efforts that can be refocused on other tasks. AI technology including natural language processing NLP and machine learning ML can create automation in process of AML screening.

How is AML Compliance impacting Businesses?

 

AML compliance can intelligently extract risk-related facts from a huge volume of data making the process of identity verification a lot more smooth and risk-free. It has the ability to track the alterations in regulations around the globe. It fights against financial crimes by identifying gaps in customer information by financial institutions and provide Know Your Customer ( KYC) alerts. Here are ways in which  AI has revolutionized AML screening to help the client onboarding process easy, resulting in bringing higher revenue and lower fraud risk to the business:

 

  • Enhanced Due Diligence:

 

Artificial intelligence can automate AML screening that helps automate the creation and updating of the client risk profile to match this against the classification process i.e high, medium or low risk that ensures continuous compliance throughout the client life cycle. Moreover, it assists the process of identity verification easier for enhanced due diligence.

 

  • Improved Client On-Boarding:

 

When applied to workflow automation, AI along with AML  has the ability to transform the generation of documents, reports, audit trails and alerts/notifications.

 

  • Risk Assessment :

 

AML compliance can help mitigate risk as whenever a client is highlighted with a suspicious activity system can block resulting in the removal of any sort of risk. It gives a full understanding of the different tiers of risks a customer presents and how to mitigate them

 

  • Detection of Suspicious Activity:

 

Any suspicious activity can be detected and immediately reported to the concerned department without putting yourself in trouble. The goal here is to have systems in place for prompt detection of activities associated with money laundering. For instance, suspicious activity can be:

  •  Increase in cash deposits of or business without any obvious reasons.
  •  Providing very little information when applying for a bank account.

 

  • Managing Regulatory Compliance and Change:

 

AML screening ability to counter patterns in a vast range of text enables it to make an understanding of all changing regulatory environment. Furthermore,  to analyze and classify documents to extract useful information such as client identities, products, and procedures that can be affected by regulatory changes. It can be instrumental in helping banks and other financial institutions to fight back financial frauds. 

 

  • AML Screening and Investigation:

 

A recent Dow Jones-sponsored ACAMS survey revealed the most challenging for bank compliance is of false positive. Underpinning the alert generation method with AML may end up in fewer false positives. whereas they’re a major part of the AML compliance method, alerts don’t seem to be enough to support an efficient and thorough investigation method. What’s needed is that the linking of high-quality information to the alert (via interpretation associate degreed link analysis) to supply a correct, graphical illustration of the legal entity structure. AML beside AI will facilitate to leverage antecedently performed steps within the alert investigation method to formulate a suggested next steps approach.

Read more about how AML regulations can help prevent financial crimes:

AMLD5- Closing the loopholes of AML:

 

Consider new technologies and improve transparency AMLD5 is here to fulfill the EU’s next-generation AML requirements:

The goals of 5AMLD are as follows:
  • Impact on  financial intelligence units and facilitate increasing transparency on who really owns companies and trusts by establishing beneficial ownership registers
  • Prevent risk associated with the use of virtual currencies for terrorist financing and limit the use of prepaid cards
  • To secure the financial transaction to and from the high-risk third parties. 
  • The access of financial intelligence units to information including bank account registers must be enhanced. 
  • Ensure centralized national bank and payment account registers or central data retrieval systems in all member states.
The Bank Secrecy Act

Know Your Business-Pillar of Strength To AML Regulations

Moving in the world of technology, where every industry is going digital, there has been very less transparency among the businesses. Collaborating with businesses and entities online leaves room for some suspicious activities – means you will have no idea about the identity of the person on the other end. For example, the business you are onboarding may be a shell company or funding the terrorist.

Know your business (KYB) – these three words always seem to pop up everywhere in the industrial sectors, especially in financial institutions. KYB has successfully evolved from Know your customer (KYC) process and has eventually become an important part of today’s regulatory firms. It plays a vital role in low-friction regtech platforms to serve all types of customers without getting involved in illegal activities and entities.

The Bank Secrecy Act (BSA) of 1979:

Back in 1970, when the Vietnam war was on the full swing, a deadly confrontation erupted regarding drug trafficking. As a result, the administration laid a strong foundation against the War of Drug. The Bank Secrecy Act of 1979 (BSA) was introduced as a part of this policy agenda to deter illegal fundings. The BSA requires all U.S. financial institutions to report certain types of customer activities to the regulatory firm – FinCEN, the federal Financial Crimes Enforcement Network. For instance, financial firms need to report about the transactions totaling $10,000 or above.

The intentions of these regulations were to hinder the cartels, drug smugglers and other productive criminal enterprises from moving money through the US. The BSA makes the transactions more visible to the federal law enforcement hence starving the actors from their profits.

From KYC to KYB

The BSA is itself a foundation for the anti-money laundering (AML) regulations also known as Know your customer (KYC) compliance. It was enumerated in the 2001 USA Patriot Act as a result of the 9/11 incident and came into effect in 2003 – adopted by a joint resolution of federal financial agencies. These regulations intend to curb the flow of money to terrorist factions and other money laundering crimes. To meet these regulations, the institutes are required to maintain a record of personally verifiable information of every customer.

It won’t be an understatement to say KYC was built upon the BSA, which enforces the financial firms to ensure the identity of their customers that they are who they claim to be. However, the BSA rules were somehow vague that were covered by KYC regulations with the introduction of the Customer Identification Program (CIP) and Customer Due Diligence (CDD).

While KYC compliance ensures the identity of the customers and keeps an eye on the risk factors associated with them, but unfortunately there is still a major loophole unsolved. That is the financial institutes weren’t required to identify or verify the stakeholders and beneficiaries of the businesses and entities they are serving. This means that legitimate firms could unknowingly shelter bad entities or shell companies while performing illegal and high-value transactions on their behalf. Doing so makes the financial firms equally responsible for the illicit transactions taking place right under their nose. 

This issue came into light through the scandal of Panama papers back in 2016 and as a result, KYB services were introduced for business verification.

Dive Deep into KYB

 

The officially titled “Customer Due Diligence Requirements for Financial Institutions” is what we consider as know your business checks or KYB. It can be taken as an extensive form of knowing your customer since it doesn’t only verify the name of the person to whom the business is registered. It also enforces the institutions to verify the identities of the chief executives and any other person who owns 25 percent or more of the business. 

KYB compliance covers an entire industry of consultants who facilitate various firms to ensure that their business customers are properly investigated and none of them are involved in illegal activities. Every financial institution, merchant acquirer or payment companies who deal with money transfers and transactions, is enforced to perform KYB check of the businesses with whom it does business.

The checks for KYB solutions include the verification of company registration, business license, identification of a business, and other executives of the business. The KYB compliance requirements may vary from address and date of birth to driving license, passports and bank statements. Moreover, these checks are also performed against sanction lists, PEPs, Adverse media, and disqualified directors. 

These authentication checks are carried out by the KYB solution providers depending on the nature of the business, transaction value, suspicious reports, and more importantly the country legislations.

The Role of 5th AML Directive

 

The regulatory regimes around the world are continuously changing with every passing day. Last year, two major regulatory directives were updated, the 2nd Payment Services Directive (PSD2) and the Fifth Anti-Money Laundering Directive (AMLD5). The PSD2 requires financial institutions to make certain data available to other institutions through the use of APIs (Application Programming Interfaces). Whereas, AMLD5 compels the financial businesses to keep tight reins on the personal information online.

The businesses from financial institutes to merchants, everyone is facing regulatory pressure to meet stringent verification requirements. To do so they deliberately need to adjust the processes to conduct due diligence. The 5th AML directive along with PSD2 and GDPR regulates organizations to verify the businesses – the KYB compliance.

AMLD5, in particular, holds liability for the EU states to collect all the legal documentation regarding the company in a central registry. Moreover, it is mandatory that this central registry must be available and accessible to all the obliged entities that are required to perform business verification. 

Enhanced Due Diligence

 

After the Panama Paper Scandal, verifying the business entities and the mainstream business structure is an integral part of AML compliance requirements, compelling enhanced due diligence (EDD). It obliges securing additional information about the business client, for instance, the nature of the business relationship, source of funds, transaction history and the enhanced monitoring of the business relationship.

KYB in Europe

 

In Europe, the 4th AML Directive is already in effect and by January 2020, AMLD5 will also be in action. The AML 4 requires the businesses to identify the obliged entities and take prudent measures to verify their identities. It facilitates the businesses to know about the UBOs in regards to trust, foundations, and legality of the entities to better understand the structure of the business and customers.

According to defined rules, the beneficial proprietor in the EU is any person who owns 25% of the corporate business. However, in the upcoming AMLD5, the proposal is lowered to 10%. 

KYB in the US

 

The Customer Due Diligence (CDD) Final Rule has been in effect since May 2018, in the US. This rule states as: 

“Beginning on the Applicability Date, covered financial institutions must identify and verify the identity of the beneficial proprietors of all legal entity customers (other than those that are excluded) at the time a new account is opened (other than accounts that are exempted)”

As per the regulations, the financial institutes include banks, dealers and brokers, mutual funds and futures commission merchants. However, different jurisdictions constitute different requirements. In fact, even one region may have different regulations to be applicable to the state members. For example, the US financial institutes, in addition to the Bank Secrecy Act (BSA), they are liable to OFAC (Office of Foreign Assets Control), FACTA (Foreign Account Tax Compliance Act) and SEC disclosure rules.

KYB Process –  From Weeks to Seconds 

 

Performing Business verification is quite difficult, time-consuming and costly. Most of the companies hide their true identities in order to surpass the money trial. Also, the shell company can obscure their true information in filling and different jurisdictions. The percentage of possession is mostly disguised through different paper trials which makes it difficult to identify. In fact, in some countries, there is no proper paper trial – means no documentation is required for setting up a business, hence no source to investigate for shareholders’ information – which is against the FATF, AML and CTF regulations.

Some of the companies are overcoming this problem by implementing KYB solutions just like KYC. However, manual verification is quite slow, error-prone and costly. To incorporate this con, the KYB solution providers are actively adopting automated ways to verify the businesses in real-time.

In this era of high competition and complex compliance requirements, there is a need for electronic ID verification of business. By automating the KYB process, the financial institutes can securely access the UBOs identifying information from the central registry and verify it. Moreover, meeting the KYB compliance can paramount the complex regulatory environment.

KYC checks KYC solutions KYC and AML

Winter is Coming: With a Storm of KYC and AML Regulations

The ever-evolving regulations are creating challenges and complexities for the financial institutes, both in national and international markets. Financial sector deals approximately with 200 regulatory changes per day and these numbers are rising. Most of the time, businesses fail to concede these regulatory requirements and face heavy fines. Since 2008, global banks have been fined more than $321 billion collectively for not following Know Your Customer (KYC) and Anti Money Laundering (AML) regulations

Even with a compliance cost of almost $100 billion globally in a single year, crimes like money laundering, terrorist financing, and cyber frauds are increasing. Financial Institutes (FI) do not only find it challenging to comply with KYC and AML regulations but increased fraudulent activities make these things even worse. Financial institutes often fail to identify fraudsters and face fines and even get banned.

Fraudsters and money launderers are exploring new ways of carrying illegal activities. An undercover agent who infiltrated Pablo Escobar’s drug cartel responds, “You can launder money in so many different ways, it is as unique as snowflakes.” To counter these challenges, regulatory authorities are making updates in regulations almost every day.

Changing Regulations with the Changing World

 

In the aftermath of the 2008 financial crisis, regulatory authorities put forth several noticeable amounts of regulations, but now almost after a decade, some regulators and lawmakers think it is time to analyze what is working and what is not and make necessary amendments accordingly.

Banks and financial institutes are the protectors of the financial systems and the responsibility to prevent financial crimes lies with them. In the last decade, these institutions have worked tirelessly to establish reliable KYC and AML procedures and systems. However, changes created by technology and globalization demands modifications in regulations. 

For instance, high demand for virtual currency has made regulators reassess in place regulations and make amendments to regularise cryptocurrency. As most of the cryptocurrencies are not backed up by any central governments the potential of its use in illegal activities, especially terror financing and money laundering, already threatens the authorities and businesses. 

The authorities are making amendments and the newest laws to regulate all these advances in financial systems. Here are some recent changes by notable global regulatory authorities: 

FATF

Financial Action Task Force (FATF) is an intergovernmental organization, which strives to eliminate money laundering and terrorist financing globally. The organization has been very keen on recommending necessary changes required to comprehensively deal with financial crimes.

Noticing the recent trends of money laundering (ML) and terrorist financing (TF), FATF recommends member states to perform legal screening of Ultimate Beneficial Owners (UBOs) of every business. Owing to the exploitation of virtual currency by criminals, FATF also recommends regulating cryptocurrencies. According to a report, $4.26 billion worth of cryptocurrencies were stolen by cybercriminals, only in 2019. FATF expects members to implement these regulative reforms in their respective states for combating ML and TF. 

European Commission’s AMLD5 and AMLD6

As a part of an action plan against money laundering and terrorism, the European Commission has introduced new regulations in the 5th and 6th AML directives. Every European country is required to implement these regulations as a part of its national action plan on AML and CFT.

AMLD5

 

The most prominent law in AMLD5 is the regulation of cryptocurrency exchanges and service providers. Before this directive, e-wallet providers and crypto exchanges were not covered under the financial regulations. AMLD5 made it compulsory for crypto businesses to perform KYC for identity verification. Furthermore, member states are required to maintain a central register for Ultimate Beneficial Ownership (UBOs) of the crypto businesses.

AMLD5 also lowers the threshold for the prepaid cards to decrease the risks of money laundering through these cards. According to the U.S Federal Bureau of Investigation (FBI), drug cartels use prepaid cards as a source to launder money earned from illegal drug sales in the USA. European countries are required to implement AMLD5 by January 10, 2020.

AMLD6

 

While the European Union’s member nations are striving to implement AMLD5, the European Commission published a new directive i.e. AMLD6 in their journal. This new directive will make AML and KYC regulations more stringent. By setting a clearer definition of money laundering and increasing the minimum liability for predicate offences, the EU aims to make AML and KYC more robust. 

The key elements of AMLD6 are: 

 

  • Addition of Cyber Crimes in Predicate offences. Predicate offences are crimes underlying money laundering and terrorist financing. Initially, cybercrimes including online identity theft, credit card frauds were not included in predicate offences. Once AMLD6 is implemented the businesses will require more enhanced KYC checks to avoid indulging in unlawful activities.
  • Inclusion of the entities that are aiding criminals to launder money in money laundering crimes. The addition of ‘enablers’ can make money laundering tracking easier.
  • The punishment for money laundering and terrorist financing is increased for up to four years including other penalties.

RegTech: A useful KYC solution  

 

While the aforementioned are major regulatory changes in the world, many countries are also regulating businesses to perform enhanced due diligence and KYC at national levels. Financial Sector is obliged to follow these regulations.

However, the financial sector is not lagging and is taking measures to remain compliant with rules. Since the finance sector always remains one step ahead in adopting innovative technology. One of the latest addition to the finance sector’s arsenal is Artificial Intelligence (AI). The finance sector can adopt AI to make KYC/AML screening more robust, cost-effective, and time-efficient.

RegTech (Regulatory Technology) refers to the use of technology-based solutions to help in compliance with financial regulations. RegTech is enabling rapid development in the financial sector regarding compliance. AI-based identity verification and AML screening solution are both cost-effective and time-efficient. Businesses should adopt AI-based KYC and customers due to diligence solutions (CDD) when onboarding customers to remain compliant with regulatory changes and avoid any offence.  

Conclusion

 

KYC laws are continually modified to catch up with the latest techniques for perpetrating financial crimes. A recent example is AMLD6 by European Commission, which intends to make KYC and AML compliance stricter. The financial sector must adopt effective measures to maintain the integrity of the institutions as well as meet the regulatory requirements. They are the first line of defence against money laundering and need to act accordingly. To ensure that businesses remain in compliance with these changes, RegTech industry is rendering efficient AI-based solutions for KYC checks.   

EUs Sixth AntiMoney Laundering Directive AMLD6

EU’s Sixth Anti-Money Laundering Directive (AMLD6)

Summary: Sixth Anti-Money Laundering Directive (AMLD6) highlights a stringent framework to combat money laundering and terrorist financing. It extends the scope of criminal liabilities and entities with an updated list of predicate offenses. AMLD6 came up with tougher penalties and widens the criminal liability to legal persons. 

The European Commission affirmed action plans to tighten the reins on mounting money laundering and terrorist financing. On 26 June 2017, the 4th Anti-Money Laundering Directive (AMLD4) came into force contributing to the same idea of combating bad money flow. It stated the regulations for information exchange and its operation among financial institutions. After this, EU co-legislators identified the need for amendments in AMLD4 which were declared in AMLD5. These changes are expected to come into effect by the 10th of January 2020 and state sectors which need to strengthen the standard operations to deter the risks of money laundering. Also, it asserts that the sectors facilitating criminal activity will be subjected to harsh regulatory penalties. Recently, the EU Commission came up with Sixth Anti-Money Laundering Directive(AMLD6) published in the EU’s Official Journal. AMLD6 introduces a harmonized authoritarian framework for the elimination of money laundering. 

AMLD6 strengthens the existing norms of anti-money laundering. It establishes minimal criminal liability rules for money laundering by setting it’s clear definition and stating predicate offences, enforces minimal sanctions and extends criminal liability to legal professionals. It reinforces the framework with the police cooperation point of view. Furthermore, the Directive sets specific requirements regarding information records and requests, sensitive data processing, and restrictions to rights. 

AMLD6 – New Measures and Amendments

 

EU Commission proposed new measures to fight against terrorist financing and money laundering activities. Commission believes that existing models are neither comprehensive nor consistent. It suggests that definitions should be cleared at the national level and scope should be widened that covers the industries with a broader perspective. It further elaborates that criminal proceedings are innovative enough to exploit the parliamentary discrepancies. These weaknesses become the source of opportunities for money launderers to convert their ill-gotten gains to good money. 

The draft provided by EU legislation is obliged to send it to Parliament as well as Council. The trialogue of three bodies will reproduce an agreed document that would be accepted as a new EU law. Denmark will not be affected by this law due to its legal agreements and the UK government may be opted out of the adoption of AMLD6 notwithstanding Brexit agreement. The fundamental component of AMLD6 is the list of 22 predicate offences. AMLD6 defines these predicate offences explicitly which will definitely impose obligations on the firms. Companies would have to take in place monitoring systems to detect direct and indirect links facilitating predicate offences. 

Following are the key elements of AMLD6 that incorporate criminal legislation:

 

 

  • Harmonized list of Predicate Offences

 

The scope of 22 predicate offences has extended. Now it includes the emerging threats of environmental crimes and cybercrimes in the EU. Environmental crimes refer to those that set out in legal acts of the Union. Similarly, cybercrimes are declared as predicate offence that was not catered in the FATF recommendations. Tax crimes are also in the scope of AMLD6, the crimes that directly and directly committed due to tax commutation. To avoid the ruinous circumstances, firms should familiarize themselves with the expanse of 22 predicate offences. 

 

  • Aiding and Abetting, Inciting and Attempting

 

The money laundering scope is extended in AMLD6. Now, aiding and abetting, and inciting and attempting lies under the premises of money laundering perspectives. By including these entities that are called ‘enablers’, money laundering tracking can become easier. These entities are considered the facilitators of the money laundering process. Therefore, AMLD6 extends its boundaries for money launderers to combat the risks of embezzling funds transfer. 

 

Key Points of 6th AML Directive

 

 

  • Criminal liability extension to Legal Professionals

 

Recalling AMLD5 in which legal professionals were spotlighted to undergo client identity verification and keep accurate information about them. AMLD6 focuses on the evaluation of legal professionals. According to which, criminal liability is extended to legal professionals i.e. partnerships and companies. It is applicable to those who facilitate money laundering through their businesses directly or indirectly for the sake of their own benefit. Legal professionals would be answerable if Individuals who caught transferring illicit funds is not identified. 

In addition to this, the representatives, executives, supervisors, and decision-makers who lack proper individual authentication or supervision would be accountable for facilitating criminal activity.

 

  • Tougher Regulatory Penalties

 

One of the most important area covered in AMLD6. The Directive says that all Member States are supposed to set the imprisonment of at least four years to deter money laundering. The business that caught facilitating money laundering would be temporarily or permanently banned. Also, there would be the closure of business units and operations, exclusion from public funding access, halted grants and concessions through which predicate offence is committed. Wise companies are in the race of complying with the regulatory norms to avoid harsh fines and reputational loss of a company. 

The rising exposure to money laundering is alarming for industries and businesses. Any entity that facilitates money laundering or terrorist financing actions will be sentenced with heavy penalties. Companies are seeking innovative solutions to tackle money laundering and to perform efficient monitoring of bad money flow through Artificial Intelligence and Machine Learning techniques. 

Data Protection and Privacy

 

This initiative facilitates competent authorities to take in place stringent mechanisms through which personal and sensitive data is collected and processed. The fundamental rights of the subjects should not be compromised in any way. The directive focuses on data protection and privacy rights, the information collection should be minimal and should not include any financial information, for example, financial transactions or credit in bank accounts. Although a limited set of information includes personal data i.e. subject’s name, bank account number, date of birth, etc. Information on the total number of bank accounts of the subject is necessary for the purpose of investigation.

Sixth Anti-Money Laundering Directive (AMLD6) will be formally published and adopted in the EU’s Official Journal and at least after 26 months of coming into force, firms would have to comply with the directive. Member States have to follow the regulatory provisions and laws to take into account the associated predicate offences that could be promoted in the premises of legitimate business in any way.