Since its implementation in 2021, the EU’s Sixth Anti-Money Laundering Directive (6AMLD) has been helping regulated entities close loopholes that the Fourth and Fifth Anti-Money Laundering Directives (AMLDs) left, focusing more on weak spots that criminals exploited. To this day, 6AMLD serves as the foundational regulatory framework that holds power towards the key anti-money laundering and terrorist financing laws in Europe.
The Sixth Anti-Money Laundering Directive is important because it adds more to the existing AML compliance processes by addressing important risks and new offenses, such as environmental crimes, cybercrime, aiding and abetting, and strictly categorizing them as money laundering crimes. Other important new rules shift to ultimate beneficial owners (UBOs), corporate compliance and cross-border transactions, and in general, stricter Know Your Business (KYB) requirements.
So, why is 6AMLD revolutionary, and how does it help safeguard the integrity of the financial system — read the blog post to find out.
What is 6AMLD?
6AMLD, or the Sixth Anti-Money Laundering Directive (2018/1673), is the latest Anti-Money Laundering (AML) Directive, which works as a building block for companies in the EU for setting AML/CTF standards and stricter processes aimed at combatting financial crime. With the new developments, 6AMLD introduced new money laundering crime categories and increased the responsibility and non-compliance fines for regulated entities.
The key objectives of 6AMLD are:
- Strengthening the rules and regulations for financial institutions and authorities to combat money laundering and terrorist financing.
- Expanding existing AML/CTF rules without fundamentally altering current EU criminal laws while also improving collaboration between member states.
Businesses operating in the EU and those outside that work with the EU market must comply with the Sixth Anti-Money Laundering Directive and implement required procedures, such as applying the risk-based approach to AML, implementing due diligence measures, or ensuring ongoing monitoring.
What is the Scope of 6AMLD?
The Sixth Anti-Money Laundering Directive standardizes money laundering offense categories and definitions (for example, aiding, abetting, or inciting). This is important, as previously, EU regulations focused only on those individuals who directly profited from money laundering activities. However, with the implementation of 6AMLD, all enablers and parties are legally accountable.
The directive broadens its scope to include anyone assisting money launderers or “aiding and abetting,” making them guilty of money laundering offenses. This expanded definition also covers those who attempt or encourage money laundering. Helping or even preparing to commit a crime are also considered criminal acts and can lead to punishment.
In general, the Sixth Anti-Money Laundering Directive covers three key elements:
- Engaging in criminal activities and using prevention methods to stop the laundering of proceeds.
- Categorizing different money laundering techniques and ways to obtain goods illegally as clearly defined crimes.
- Focusing on identifying and preventing acquiring property through illegal means.
These key areas and stricter regulation terms all come with the single goal of helping member states standardize AML/CFT regulations and prevent financial crime altogether.
Stricter Rules Regarding Criminal Liability
Previously, only individuals could be held accountable for money laundering, but 6AMLD extends criminal liability to legal entities, including companies or partnerships. That means the Directive extends criminal liability and targets companies involved in money laundering, exposing them to fines or even “the corporate death penalty” (permanent closure).
Under the Sixth Anti-Money Laundering Directive, a company can be held liable for failing to prevent crimes within its organization, including illegal activities committed by its management or employees acting independently. Here, the goal is to target bigger organizations with more complex ownership structures and those that fail to keep up with AML/CFT programs.
Heavier Punishments and Sanctions
6AMLD focuses on accountability and sets a maximum imprisonment term of four years for individuals and corporate entities guilty of the mentioned crimes, along with extra terms and sanctions (Article 5). For example, new rules for fines that reach five million euros were introduced.
Under 6AMLD, both individuals and companies can face the following sanctions:
- Judicial surveillance measures.
- Permanent or temporary bans on commercial activities.
- Criminal penalties, including imprisonment for responsible professionals.
- Denial of access to government benefits, including grants or public funds.
5AMLD introduced similar punishments, but they were expanded with the implementation of 6AMLD. As a result, to avoid non-compliance with AML laws, internal compliance teams should review different laws and regulations depending on the country and the company’s operating markets. This is important when assessing AML risks and testing AML programs to ensure that criminal activities can be detected effectively.
6AMLD also introduces targeted sanctions for high-risk entities, including financial institutions and crypto-asset service providers (CASPs). With emerging technologies such as digital assets, new risks have become a bigger issue, especially in the context of criminal organizations or money laundering offenses (Article 6).
With that in mind, the directive requires enhanced due diligence (EDD) for cross-border transactions involving CASPs to ensure stricter monitoring standards. Similarly, credit and financial institutions must apply EDD when handling high-net-worth clients with large assets.
Related: AML Red Flags — Complete Breakdown
Focus on Cooperation of Member States
6AMLD focuses on getting all member states together as a tool to prosecute companies or individuals linked to money laundering activities more accurately and efficiently. This is important, as money laundering rings carry out their activities in different EU countries and across borders, which means that local judicial authorities must share information to enable prosecutions on a global level.
In other words, 6AMLD sets clear standards for sharing information, making it easier to prosecute criminals across the EU. 6AMLD provides guidelines to decide where prosecutions should take place. Several factors need to be considered, such as where the crime took place, the offender’s nationality, the victims’ countries, and the jurisdiction involved.
Not only money laundering but also crimes like corruption, human trafficking, and organized crime linked to drugs or weapons should be reported (even in cases if the mentioned crimes are legal in other countries outside the EU). This ensures a unified approach to tackling money laundering across the EU.
5 Key Changes Regarding the 6th Anti-Money Laundering Directive
Some of the most significant changes with the 6AMLD that might require adjustments to maintain compliant internal AML policies can be summarized in five key main points, which are:
- Standardizing definitions linked to different offenses like smuggling, human trafficking, and insider trading across the EU.
- Holding companies legally accountable for “aiding and abetting” money laundering.
- Adding environmental crime and cybercrime to the list of predicate offenses for money laundering.
- Extending criminal liability to companies and partnerships, including employees engaging in illegal activities.
- Increasing the minimum prison sentence for money laundering offenses up to four years.
More rules and regulations can sometimes result in extra challenges that companies need to face. For example, especially without any sort of AML automation solution, compliance officers can face increased responsibilities (which means more documentation to assess, more transactions to check, etc.), as well as heightened internal business risks (depending on the industry, for example, if the company operates crypto transactions or is cash-intensive), and growing costs due to the expanded company liability.
Since legal entities can be held accountable when a “lack of supervision or control” by an individual in a “leadership position” enables a criminal act (Article 7), AML and RegTech service providers need to show their own corporate responsibility by guiding their partners in the right direction and providing accurate, up-to-date data. For example, this is important when offering solutions like AML screening, which is used for real-time PEPs and sanctions screening (PEP statuses can change and so do sanctions lists), adverse media checks, or watchlist screening.
Related: How to Get Ready for Your AML Audit
What are the 6AMLD 22 Predicate Offences?
The 6th Anti-Money Laundering Directive was presented along with a list of 22 predicate offenses, or criminal activities, that can be used for money laundering and other fraudulent activities. As one of the key goals to harmonize and provide EU member states with a unified approach to AML compliance, this list was adapted, and new crimes, such as cybercrime and environmental crime, were added. The list also includes unlawful acts like tax evasion, cryptocurrency fraud, drug trafficking, copyright infringement, human trafficking, and others.
Often, most of the predicate offenses are linked to money laundering because they are used as a channel to clean dirty cash. Alternatively, criminals exploit these tactics to generate illegal profits and then use different schemes to conceal the true source of the funds, making them appear legitimate. Summarized and clearly stated offenses in the list help countries focus on new threats while maintaining stable communication and strategy on how to treat the mentioned crimes: better detect, investigate, and prevent money laundering.
Keep in mind that EU member states can add or treat other crimes as predicate offenses based on their national laws. What’s more, the EU has already begun working on the 7th Anti-Money Laundering Directive, which just goes to show that companies need to stay aware of the latest regulations and know how to adapt quickly.
Technological Solutions in the Context of 6AMLD
Under 6AMLD, technological or automated solutions are mandatory as a way to make compliance with the Directive easier. This is mandatory for large companies or, basically, anyone who works in different markets, has a large customer base and manages high transaction volumes. Various local and global regulations can sometimes make it hard to ensure compliance when multiple processes need to be supervised by small internal compliance teams.
Without any RegTech solutions, it’s hard to take a proactive approach or detect crime in real-time, which is now possible with solutions like AML screening and real-time alerts regarding flagged suspicious transactions. So, in this sense, 6AMLD takes an innovative position by mandating technology as the best way to boost the effectiveness of AML measures, such as automated CDD solutions, database checks, transaction monitoring, Know Your Customer (KYC) or Know Your Business (KYB) verification, and so on.
iDenfy’s Approach to 6AMLD and AML Automation
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Our AI-powered AML and KYC/KYB platform can help you automate critical tasks like:
- ID verification: (both for individuals and companies, including various custom case options like UBO verification or sole proprietorship verification), streamlined government-issued ID verification, biometric verification, reauthentication, database verification, and more.
- AML screening: PEP screening, sanctions screening, watchlist screening, adverse media screening, and automated customer risk assessment.
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