“AMLD6 at the gate”. Are you ready?
AMLD6 came into effect for EU Member states on the 3rd of December 2020 with a set deadline for its implementation and full development by EU financial institutions on 3 June 2021.
Almost a year has passed since EU Member States were obliged to implement the Fifth Anti-Money Laundering Directive (AMLD5) into their national legislation. A lot of financial sector players such as investment firms, cryptocurrency exchange providers, banks, KYC/AML service providers and many other FinTech institutions got overwhelmed by the toughness of the task and could not comply with requirements. Most EU states failed to follow the directive by 10 January 2020 and had serious difficulties in launching public registers in order to reveal true owners of the businesses established in their countries.
However, the next and even tougher challenge is in front of them: AMLD6. Let’s see, what was the emergency that led to a new set of rules being created less than five months after the previous directive and what has changed since then.
The Background of the document. What were the prerequisites for AMLD6?
The European Union was forced to ramp up its timetable and to introduce broader offence types as well as corresponding penalties due to the recent Baltic money-laundering scandal, which has been called the largest money-laundering scandal ever in Europe, and quite possibly the largest in world history.
It began in Latvia and Estonia and has engulfed several Nordic lenders, particularly Denmark’s Danske and Sweden’s Swedbank.
Trouble started back in 2007 when Danske Bank took over Sampo Bank, including its Estonian branch. This region has always been vulnerable to illegal financial flows due to their closest neighbour – the Russian Federation, but the Bank presumably did not take the necessary precautions to stop those flows.
According to the research of independent investigators’, more than half of Danske Bank’s customers in Estonia were found suspicious in relation to money laundering activity.
Money was laundered “on an industrial scale” and sent worldwide for a period of almost ten years. The world started paying attention to this insane situation only in 2017, and pretty soon Danske Bank was forced to cease its business operations in Estonia. It was also fined by the Danish authorities for 12.5 million Danish crowns (1.7 million euro), but it was a drop in the sea, of course.
The whole impact of the scandal is estimated at 180 billion euros, but this story is far from being over. Further investigations are still ongoing to try and uncover the roles of other banks in those money laundering schemes. For example, Swedish Swedbank was drawn into the scandal in 2019, after receiving reports that it handled some of the same payments that went through Danske Bank. Currently, German Deutsche Bank is facing huge fines and possible prosecution of “senior management” for the same reason.
“…Professional money launderers — and we have identified 400 at the top, top level in Europe — are running billions of illegal drug and other criminal profits through the banking system with a 99 percent success rate…”The former head of Europol, Rob Wainwright, April 2018
The ABC of AMLD6
AMLD6 is the 23 October 2018 EU Directive (2018/1673) of the European Parliament on combating money laundering by criminal law.
This norm profoundly advances the previously established set of directives (AMLD4 – AMLD5). If AMLD5 has obliged legal entities to maintain identity verification of all their clients — AMLD6 focuses on the evaluation of legal persons themselves. This means criminal liability is vastly extended and is applicable now to all the companies who are anyhow related to money transactions.
As a matter of fact, today’s criminal framework against money laundering inside the EU can be described as a mosaic set of rules and regulations rather than a complete, “functioning-as-one” organism. The system as a whole has a lack of legal clarity in certain individual cases and fails in the recognition of some crimes and security violations by companies.
AMLD6 focuses on these problems by hardening two definitions:
- what is a crime in the relation to terrorism and money laundering
- what are the liability and penalties/sanctions of the parties involved in those activities.
It tries to standardise those definitions for all EU member states and promote more intensive and effective collaboration of the countries in the fight against money laundering.
Regardless of having 16 articles, the Sixth AML Directive could be separated into four distinct sections:
- Expanded and harmonised definition of criminal activity
- Stricter penalties for Natural Persons
- Broader criminal liability and sanctions for Legal Persons
- Increased Cooperation between Member States
Let’s have a closer look at each.
1. Expanded and harmonised Definition of criminal activity.
The first three articles of the Directive define what is a criminal activity and what offences are considered to be a criminal activity. A total of 22 crimes have been established within AMLD6, from tax crimes and terrorism to digital crimes.
Further on, the directive focuses on the money laundering offence and explains what kinds of conducts should be punished when committed intentionally:
- the conversion or transfer of property, knowing that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person involved in such activity
- the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from criminal activity
- the acquisition, possession or use of property, knowing at the time of receipt, that such property was derived from criminal activity.
The fourth article of the directive continues expanding the regulatory scope and clearly defines the penalties for businesses and individuals.
“Member States shall take the necessary measures to ensure that aiding and abetting, inciting and attempting an offence referred to in Article 3 is punishable as a criminal offence”.article №4 of AMLD6
2. Stricter penalties for Natural Persons
“Natural persons” (individuals involved in money laundering) will get a minimum four years imprisonment for money laundering offences or related activities instead of one year which was the previous penalty.
“Member States shall take the necessary measures to ensure that the offences are punishable by effective, proportionate and dissuasive criminal penalties” – says the directive.
The monetary fine is increased to five million euros.
3. Broader criminal liability and sanctions for Legal Persons
Legal persons(companies) can now be held criminally liable if they fail to prevent money laundering.
In case a business is found to be a part of a financial crime due to lack of AML measures or negligence it will be liable for such penalties as:
• Exclusion from entitlement to public benefits or aid
• Temporary or permanent exclusion from access to public funding
• Permanent or temporary disqualification from the practice of commercial activities
• Placing under judicial supervision
• Judicial winding up
• Temporary or permanent closure of establishments
4. Increased Cooperation between Member States
Money laundering and other financial crimes often involve jurisdictions of more than one country. AMLD6 focuses on this issue and demands more effective cooperation between the competent authorities in different Member States.
This cooperation means that every member state that was impacted by a specific financial crime will work together with other governments to prosecute the perpetrators. This will help to centralise legal proceedings and ensure that judgments are issued in a standardised way across the whole European Union.
AMLD6 describes cooperative procedures between the states required for financial crimes’ detection and cross-border aggression. Furthermore, it provides a list of key factors for authorities to consider while deciding how and where to conduct their investigations. They must take into consideration the country of origin of the victim, the place where the perpetrator resides and the jurisdiction of the country where the crime took place.
“…One of my favourite frustrations is on financial crime – the anti-money laundering regime. We have created a whole ton of regulations … the banks are spending $20 billion a year to run the compliance regime … and we are seizing 1 percent of criminal assets every year in Europe…”The former head of Europol, Rob Wainwright, April 2018
6AMLD and BASIS ID
BASIS ID experts are aware of all the risks outlined in this report and are ready to help your company to take the required actions to be fully compliant with these new regulations.
The company has created a wide range of solutions driven by artificial intelligence and machine learning that are helping many organisations to comply with the current AMLD5 today.
In the same way, BASIS ID works hard to ensure that all its solutions comply with the recent tight regulations regarding security and money laundering.
“A distinctive feature of BASIS ID is the flexibility in providing and integrating solutions across many industries. We are innovators in the field of data analysis and personal data verification. I’m proud to announce that all BASIS ID electronic identification solutions are compliant with all the EU directives, including AMLD6”, commented Akim Arhipov, the executive director of BASIS ID.
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