The 6th Anti-Money Laundering Directive
The what and the when
The 6th Anti-Money Laundering Directive (6MLD) is due to come into effect on 3 December 2020. It must be enforced by all regulated financial institutions with six months, by a deadline of 3 June 2021. The directive follows directly on from 5MLD, implemented in January 2020.
Whilst many businesses are struggling to keep up with the pace of new Anti-Money Laundering Directives, it’s clear the scale of money laundering, its reach and impact are constantly evolving. As such, it’s understandable that new MLD’s are regularly issued. After all, AML processes are meant to be implemented on a Risk-Based Approach, so it’s appropriate that compliance requirements are constantly being developed.
At the same time, organised crime, people-trafficking and terrorist financing are continuing across the continent. The latest directive goes even further and now include offences such as cybercrime, insider trading and related environmental crimes.[1]
Hang on, what about Brexit?
As a result of the Brexit vote, the UK government has chosen to opt out of enforcing compliance with 6MLD, on the basis that Britain’s domestic legislation is already up to scratch and is said to ‘go much further’ than what is recommended in the EU’s Anti-Money Laundering Directives. But irrespective of the outcome, any regulated UK businesses operating in Europe’s financial sector must still be fully compliant with changes set out in 6MLD.
But before going into the demands of the latest directive, it may be worth first reading our 2019 Money Laundering Regulations Compliance Guide
So, what’s new in 6MLD?
Harmonising the precise definition of money laundering
6MLD sets out a more specific and harmonised definition of money laundering. The updated directive has expanded the list of so-called predicate offences – those that are part of a larger crime – to include 22 different crimes, which are now deemed to directly constitute money laundering.
The new extended list is expected to further iron out any existing loopholes in national AML regulations, which may have enabled criminals to avoid penalties and prosecution. The expanded list covers technical nuances and the direct impact of broader contributory crimes including self-laundering, cybercrime, aiding, abetting and inciting money laundering, among others.
Changes to criminal liability
Prior to 6MLD’s introduction, only individuals could be punished for money laundering. But the new EU directive now extends criminal liability far wider to cover all legal persons involved. This includes everything from partnerships, companies, formalised joint ventures and more. For example, if a member of a company’s legal team knowingly failed to act in preventing illicit proceedings being carried out by someone senior within an organisation, they could also be charged and convicted. It’s a deliberate move that legislators are introducing and is intended to force a greater level of accountability right across regulated organisations.
Clamp downs backed by tougher punishments
Another new step intended to help further deter financial crime has also been taken in the shape of far stiffer sentences. The 6MLD dictates that all EU member states must now set the minimum prison term for anyone found guilty of money laundering to four years – a notable increase given it had previously been just a year.
Irrespective of the prospect of prison, any business found to be in breach faces some hefty financial penalties. These include fines of up to €5m or 10% of total annual turnover issued against the company. Temporary operating bans or a €5m fine may also be made directly against its management, along with withdrawal or suspension of authorisation. Offenders can also expect significant lasting reputational damage following public statements highlighting their role in the breach and related penalties.
The latest directive also grants judges across member states increased powers when it comes to tackling money laundering, by preventing organisations from accessing any form of state funding.
Greater cross-border collaboration of member states
The updated directive also encourages greater collaboration between member states, particularly in relation to the handling of money laundering offences.
For instance, if a money laundering operation is taking place over two or more different countries, which are member states, then all countries involved are being encouraged to work together going forward to identify all illegal proceedings, prosecute and convict the criminal(s) in question.
How HooYu can help
The clock to 6MLD compliance is ticking down already and if your company operates in the EU, you’ll need to be ready for the 6MLD deadline in 2021.
HooYu is a global customer on-boarding platform that provides UI & UX tools to deliver customised mobile or desktop digital KYC journeys. HooYu is engineered not only to increase the integrity of KYC processes but to maximise the percentage of customers that can be successfully on-boarded.
To increase the integrity of KYC processes, HooYu is the first identity platform to blend ID document validation, digital footprint analysis, geo-location and facial biometrics with traditional database checks and PEPS & sanctions screening. Behind all our proprietary KYC technologies is an identity confidence scoring engine that enables regulated entities to use HooYu on a Risk-Based Approach. In this way, high-risk customers can be mandated to offer more evidence of identity than low risk customers.
The HooYu digital on-boarding journey combines clever UI & UX with a range of KYC tools. Key UI & UX considerations such as dynamic customer prompts, device language detection, reminder messages, white label customisation, logic steps to reduce friction, and customised journeys all help to maximise the success of customer account opening processes.
HooYu is used by tier one banks such as NatWest, challenger banks such as Countingup & many prepaid, FX, PSP and money transfer FinTechs.
To find out more about the implications of 6MLD and how HooYu can help you comply with current or future Customer Due Diligence requirementsplease email david.pope@hooyu.com
- [1] European Commission – Commission steps up fight against money laundering and terrorist financing – https://ec.europa.eu/cyprus/news/20200507_1_en
