6AMLD – EU directive to prevent money laundering
The 6AMLD aims to strengthen already existing provisions from the 5AMLD to better regulate money laundering within the EU. By clarifying offences and punishments, as well as increasing the cooperation between member states, the European Union hopes to be even more successful in their fight against money laundering and terrorism financing.
What is the 6th Anti Money Laundering Directive?
As of June 2021, all financial institutions within the EU must have implemented 6AMLD – the 6th Anti Money Laundering Directive. The directive is a further developed and more advanced version of the already implemented 5AMLD which aims to prevent money laundering and other financial fraud.
The current system of rules and regulations to work against criminal financial activity have lacked clarity, which in turn has led to some cases slipping away without penalty measures being taken. The 6AMLD will clarify definitions of both offences and penalties to prevent more cases from going cold.
The 6AMLD aims to
- Define money laundering and remove loopholes in EU member states’ domestic legislations. There’s a new list of 22 predicate offenses which include tax crimes, environmental crime and cyber-crime, meaning firms in different member states may have to adjust their AML programmes to be able to manage the new risk environment they’ll be working in.
- Extending and toughening punishment as 6AMLD makes it possible for lawmakers to prosecute not just those profiting directly from money laundering, but “enablers” too. The minimum prison sentence will increase to four years instead of the previous one-year sentence. In addition, judges will also have the power to stop entities from accessing public funding.
- Extend AML/CFT responsibility from single individuals to management, companies and partnerships. The current rules only punish those individuals performing the act of money laundering. New regulations will now be able to hold any legal person, including companies, accountable as a way to fight financial crimes on a larger, more global, scale.
The EU also wishes to see increased cooperation between member states and firms working with AML as a way to address the issue. By introducing certain requirements for information sharing between jurisdictions, 6AMLD will be able to prevent dual criminality, meaning crimes that are being committed in one state whilst the actual laundering takes place in another.
Financial institutions prepare for 6AMLD
Financial organizations and companies must prepare both technically and practically for the changes that come with 6AMLD. 5AMLD, which was strictly implemented in the beginning of 2020, made financial institutions set frames for safe KYC (Know Your Customer) procedures – an important part of the process to protect from fraud by identifying customers for business purposes, as well as assess and monitor risks for new customers. Safe KYC is key in being able to implement 6AMLD.
It’s also important that compliance staff are trained by state firms to develop a deep understanding for the new AML implementations and how to manage their new resources. There will be new offences to look out for and monitor, as well as new technology in use.
By making sure new procedures and technologies are being implemented correctly, the European Union expects to see a big difference in the number of financial crime cases being solved.
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