6 AMLD- Key Highlights of the Directive and What Financial Institutions Can Do to Comply

The European Union’s 6th Anti Money Laundering Directive is to be enacted by all banks and financial organizations in the member states by June 3, 2021. This 6AMLD directive carries the same principles of 4AMLD and 5AMLD, and further aims to empower financial organizations in the member states to do more in the fight against money laundering and curbing other financial crimes.

Some of the major highlights of 6AMLD are concerned with expanding the scope of existing legislation, clarifying certain regulatory details like a uniform detailed definition of money-laundering across all jurisdictions, and toughening criminal penalties across member states. The recommendations within this directive state financial businesses should review their AML monitoring processes and identify areas for improvement within their AML/CTF workflows and compliance programs.

Here are the key highlights of the directive and what financial institutions can do to comply.

Key Highlights of 6AMLD

1. Harmonization and Listing of Predicate Offenses

The directive brings forth a major change by defining 22 detailed predicate offenses which strive to further elucidate and define money laundering within member states. These offenses include certain tax crimes, environmental crimes, and cybercrimes. The harmonization of the money laundering definition not only helps the member states in navigating inter jurisdiction-based penalties, but it also enables tracking criminals who hide under vague legislative definitions to get away with financial crimes. This is also significant because it introduces cyber-crime as an offense within member states.

Therefore, banks and financial organizations shall now have to ensure that their AML/CTF programs can be customized and streamlined to comply with the new risk environment that this directive proposes. It also requires them to configure their existing AML/CTF programs to detect suspicious transactions linked with these new 22 predicate offenses.

2. “Enablers” to Be Subjected to Criminal Penalties

While 5AMLD emphasized legally prosecuting individuals directly profiting from money laundering activities, 6AMLD brings “aiding and abetting” as well as “inciting and enabling” as an offense too. So, any person or business entity aiding or abetting money laundering activities shall also be considered as a primary offender and subjected to the same criminal penalties as imposed upon the person who directly commits the offense, or who is profiting directly from it.

Hence it is important that banks and financial institutions now ensure that their AML/CTF programs are efficient in detecting transactions related to aiding and abetting money laundering activities. This can be achieved by streamlining and carrying out in-depth KYC processes, and scanning customer profiles in real-time against sanctions and other lists to detect suspicious activities aided by enablers.

3. Extension of Criminal Liability to “Legal Persons”

6AMLD importantly clarifies and states that criminal liability should also be extended to “legal persons”. According to the directive, these legal persons can be consultants, lawyers, accountants, an individual or a business, etc. who are either directly a part of the money laundering process or are enabling it. This clarification also establishes that any legal person who overlooks or fails to prevent money laundering activities by not having a robust AML/CTF program in place to track suspicions from within the organization can also be subjected to criminal charges. Furthermore, this directive also states “acts of omission” according to which individuals in senior positions who fail to identify and prevent AML crimes from occurring through their compliance programs should also be prosecuted.

While EU directives set a very compelling context for bigger financial institutions to put in significant efforts towards the global fight against money laundering, it is expected from banks and FIs to choose robust and efficient AML/CTF programs to comply with 6AMLD directives. In addition to that, banks and FIs must invest in continuous training for their employees and keep a check on illegal activities being carried out within their organizations.

Summary

Financial institutions must attain an in-depth understanding of the new scope presented by 6AMLD and ensure that their compliance processes thoroughly support this directive — especially the added predicate offenses — within their existing AML/CTF compliance programs, and in addition, create a strong foundation of KYC and list screening processes for enhanced transactions monitoring. FIs will now also have to review their staff training to inculcate these new clarifications.

With every new directive, the EU strives to ensure that banks and FIs in its member states attain harmony in the fight against money laundering. With the new directives in place, FIs and banks must support the cause to the best of their capabilities.

The author is associated with Navaera Worldwide, a global knowledge management company that works closely with the financial services industry globally assisting them in enhancing their regulatory compliance and customer engagement processes.