We’re just a short couple of weeks away from the sixth Anti-Money Laundering Directive (6AMLD) coming into effect on December 3rd, 2020. This directive will expand current anti-money laundering legislation’s scope, clarify regulatory details, and make criminal penalties more severe.
So, here comes another change project, right? You have a little over six months left to implement the changes directed by the 6AMLD. Now is the time to fully inform yourself about this directive. Start preparing yourself now not to end up in a permanent panic next year. Because honestly? Even though this directive makes legal persons more accountable, we don’t expect authorities will close banks for compliance failures. But they will have to put the blame somewhere. And that will most likely be with the people responsible for compliance. Don’t let it be you.
Intentions of the sixth Anti-Money Laundering Directive
With the sixth Anti-Money Laundering Directive, the European Union attempts to create a more cohesive compliance landscape that will help authorities cooperate faster and more efficiently across borders. Globalized crime is hard to fight. Criminals use legislative differences across borders to their advantage. That’s why the EU aims to close loopholes in the domestic legislation of its member states. If the European Union succeeds, it will be a big blow to criminals. Instead of abusing regulatory differences between 27 countries, criminals will come to face one big block of nations united in their approach to financial crime prevention.
Harmonizing predicate offenses
What is money laundering? You’d be surprised to know that every country has its idea of what is and isn’t a money laundering offense. That’s why under 6AMLD, there’s a list of 22 crimes seen as predicate offenses to money laundering. A predicate offense refers to a crime that is part of a larger crime. So, when we’re talking about financial crime, a predicate offense is any crime that could lead to money laundering or terrorism financing. The 22 predicate offenses listed under 6AMLD are:
Extension of criminal liability
Alongside the expansion of the list of predicate crimes, 6AMLD also extends criminal liability. Currently, only people can be prosecuted for money laundering offenses. Under 6AMLD legal persons, such as companies or partnerships, also become punishable for money laundering. This means that financial institutions will be held liable for failing to prevent money laundering. Consequently, these companies can be temporarily banned from doing business or even be forced to close permanently.
In the new directive, punishment becomes tougher overall with increased jail sentences from a minimum of one year to a minimum of four years for natural persons. Not only that, but individuals can also be fined, and legal entities can be excluded from public funding as a sanction.
The scope of people that can be held accountable for money laundering also widens as anyone who gets caught in aiding and abetting, inciting and attempting money laundering will be punishable.
With 6AMLD, the EU recognizes that a crime can occur in one country while money laundering related to that crime happens in another country. That’s why the European Union requires its member states to share information so that cross-border offenses can be punished accordingly.
The walls are closing in
What do these changes mean for you? It means that banks can no longer stay asleep. In the past years, we’ve seen so many banks fail to fight financial crime. The fines coming from those failings might have been a manageable risk for most financial institutions, but the risks of failing to comply under this new directive certainly aren’t. If the European Union and its member states are serious about fighting financial crime, they will enforce these laws. Meaning that your business could be closed temporarily or permanently if you fail to comply.
That’s what can happen in theory. But, looking back at the 2008 financial crash, we don’t expect authorities to permanently or even temporarily close most banks. Remember the phrase ‘too big to fail?’ That still stands. Unlike most businesses, closing a bank overnight will be a big blow for most societies. If people suddenly can’t access their bank accounts, that will cause a lot of social unrest. But, the EU is committed to the fight against financial crime. They recognize that it damages the integrity, stability, and reputation of the financial sector and threatens the internal market and the Union’s internal security. So, if banks are too significant to close, who do you think they will target to instill enough fear for banks to make sure they actively participate in the fight against financial crime? Please make sure it’s not you.