6AMLD, also known as the Sixth Anti-Money Laundering Directive and is an important plan of the EU framework to counter money laundering and terrorist financing. By developing 6AMLD, the aim is to create better cooperation between EU Member States and thus ensure that companies and institutions increase their accountability when it comes to combating money laundering.
To successfully navigate the requirements of 6AMLD, companies must prioritize the integration of a robust Know Your Customer (KYC) strategy, which includes Customer Due Diligence (CDD), into their overall compliance framework to verify the identities of their clients, assess potential risks, and monitor financial transactions for suspicious activity and red flags.
A well implemented KYC and CDD process not only aligns with regulatory expectations but also strengthens the organization’s ability to combat financial crime effectively.
First and foremost, companies should enhance their customer identification procedures to ensure accurate verification of client identities. This includes collecting comprehensive information during the onboarding process and regularly updating this data to reflect any changes in circumstances.
Additionally, a thorough risk assessment should be conducted to categorize customers based on their potential risk levels. By understanding the unique risks associated with different customer profiles, companies can tailor their Know Your Customer monitoring efforts to combat Anti-Money Laundering, detect terrorist financing, and identify potential frauds, focusing resources where they are needed most to effectively address suspicious activities.
What is 6AMLD?
The Sixth Anti-Money Laundering Directive (6AMLD) plays an important role in the EU's strategy to combat money laundering and the financing of terrorism. This directive was approved in October 2018 and came into effect in December 2020.
From 5AMLD to 6AMLD
5AMLD, with its focus on increased transparency and broader scope, represented a big step forward. But the world has not stayed the same, and neither has the EU. Just as fraudsters evolve and improve, so too must AML regulation become safer and better. When 6AMLD came into force, new elements were added to the regulations.
Key Changes Under 6AMLD
Annual profits from organized crime are estimated to range between 92 billion and 188 billion EUR. Each year, it increases.
The primary focus of 6AMLD is to address legal loopholes and weak regulations exploited by financial criminals. This includes addressing with cyber offenses, identifying Ultimate Beneficial Owners (UBOs), regulating cross-border corporations and addressing environmental crime. Additionally, 6AMLD holds corporations accountable for past wrongdoings.
This directive goes beyond a simple legal adjustment, it serves as a powerful tool to safeguard the credibility of financial systems. Organizations should strengthen KYC and CDD screening measures. By doing so, 6AMLD aims to combat the complex processes of money laundering and predicate offence.
Ultimately, it seeks to promote secure cross border trade and strengthen overall financial integrity.
The Sixth EU Anti-Money Directive
6AMLD became active on June 3, 2021 and is called the Sixth Directive because there are five other directives that came before it. 6AMLD is the most recently developed regulation adapted by the European Union.
1AMLD:
The European Commission assesses risks to protect the EU internal market. The first Anti-Money Laundering Directive (1AMLD), adopted in 1990, aims to prevent the financial system from being exploited for money laundering. It requires obligated entities to conduct customer due diligence by identifying and verifying clients, monitoring transactions, and reporting suspicious activities.
2AMLD:
In 2001, the EU introduced the 2nd Anti-money Laundering Directive (2AMLD) to align its anti-money laundering framework with international standards, particularly those of the Financial Action Task Force (FATF). The directive expanded the types of offenses related to money laundering and identified high-risk businesses for closer monitoring
3AMLD:
In 2005, the EU introduced the 3rd Anti-Money Laundering Directive (3AMLD) to broaden the scope of anti-money laundering efforts. This directive included certain non-financial businesses and professions, such as legal services and accounting firms, under its regulations.
4AMLD:
In 2017, the 4th Anti-Money Laundering Directive (4AMLD) enhances the provisions of the 3AMLD. It aims to combat illegal financial activity by promoting transparency among financial institutions and holding them accountable for financial crimes.