Money Laundering is a trillion-dollar industry and Anti-Money Laundering regulation is one of the fastest moving areas of financial regulation. Shortly after the EU’s 4th AML Directive, lawmakers realised it needed further amendments to catch up with criminals resulting in the fifth installment. Only a few weeks after its transition across the European Union, it is already time to focus on the next one: 6AMLD. A summary.
A Lot Of Confusion
On 10 January 2020, the 5th Money Laundering Directive (5AMLD) became applicable across the EU. It seems to be a common misconception even among experts across the Internet that this was the day when it entered into force. That’s a bit concerning because there is quite a difference between the two as the latter is the moment when national regulators need to have a directive’s rules transposed into the national law (for a very brief overview of how EU legislation works, have a look here). The UK, for example, has done that through the Money Laundering and Terrorist Financing (Amendment) Regulations 2019. It’s important because this is what matters when you are in the UK in this case, especially since a directive are an instrument that sets out a goal that all EU countries must achieve when they “translate” the rules of the EU into the law of the member states. So, not by accident the rules between member states with regard to a specific directive can differ because the European lawmakers use this tool to let the individual countries to devise their own laws on how to reach these goals. So, if you wondered the 5AMLD actually entered into force twenty days after its publication on 30 May 2018.
The 5th In A Nutshell
Sounds like semantics, but this is even more important when you consider all the confusion that a directive like the 5AMLD already creates among interested parties. Take the crypto world that is abuzz because of the latest amendment to the European money laundering rules that extends the scope to cryptocurrency exchanges and wallet provider.
It also extends its scope to a whole bunch of other people doing similar works to auditors and accounts or traders in goods that require payment of €10,000 and more like dealers in work of art or estate agents acting as intermediaries. The 5AMLD also lowers the thresholds for electronic money and prepaid instruments like anonymous payment cards and further improves the transparency on beneficial owners. And it raises the bar in terms of Enhanced Customer Due Diligence measures for high-risk third countries or the work that needs to be done by national authorities.
In fact, this is so big that there is some leeway for selected rules like the interconnection of all national registers until next year.
By now, you’ll have grasped the dimensions and the uncertainty that surrounds this piece of EU legislation and why we thought additional confusion isn’t overly helpful.
After The Game
This is all the more the case since – like a former head coach of the German football team once put it – “after the game is before the game”. What that means is nothing else that regardless the significant amendments we have just seen introduced, there is more change coming so or in football terms: while it’s great to have just finished the match, there is another big one coming right up we better get prepared for.
Because, despite the ongoing transition of No. 5, there is already a 6th EU Money Laundering Directive lined up that was published on 23 October 2018.
The EU’s member states have until 3 December 2020 to transpose it into national law, so the clock is ticking.
Why Do We Need 6AMLD?
What do we get though from this next round of AML rules?
One key aspect is the focus on criminal activity and criminal offences. The minimum term is set for more than 6 months with graver cases calling for a punishment of a maximum term of imprisonment of at least four years. The scope in terms of intentional coduct considered a criminal offence now included:
- transferring or converting property (assets of any kind), knowing that it is the product of criminal activity, to hide or disguise its illicit origin or to assist anybody involved to evade the legal consequences of their actions;
- hiding or disguising the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that it came from criminal activity;
- acquiring, possessing or using property knowing, at the time it is received, that it had come from criminal activity;
- aiding and abetting, inciting and attempting these offences.
Additional aggravating factors and penalties as it isn’t limited to prison terms but can include anything from exclusion from public benefits or aid, to disqualification from carrying out commercial activities, judicial supervision, to freezing or confiscating the property concerned and more.
More Or Less Collaboration
The new directive also seeks to further strengthen the collaboration between the authorities of the EU member states though the UK, Ireland and Denmark have decided that they don’t want to take part in this exercise, so they don’t have to adopt it.
Talking about adoption and what we already mentioned above: directives set out minimum requirements and often allow member states to go beyond that. The German Federal Ministry of Justice has already drafted a bill implementing the requirements of the 6AMLD and it looks like the Germans are taking several steps further what was required. For example, the draft bill includes a much broader definition of money laundering and covers practically all conceivable white-collar crimes with regard to money laundering.
What’s Next after 6AMLD
Again, if you had thought that was all, you were once again mistaken. Anti-Money Laundering is one of the busiest areas of financial regulation. Only the other day, the European Banking Authority (EBA), one of the European Supervisory Authorities that are part of European System of Financial Supervision, launched a consultation on revised guidelines on money laundering and terrorist financing risk factors. It won’t be the last of AML relevant documents though – after all when the European Commission last week published its Work Programme 2020, it highlighted that “to ensure the integrity of the European financial system and reduce the risks of instability, a new Action Plan on Anti-Money Laundering will seek to improve the supervisory system and improve the enforcement of the rules“. Sounds like a lot more work, doesn’t it?