The 3rd of December 2020 saw the introduction of the 6th AML Directive into European law, with implementation of those regulations for all organisations within EU member states by the 3rd June 2021.
While the United Kingdom has opted out of the Anti-Money Laundering Directive (AMLD) due to its departure from Europe, many UK financial institutions have adopted the 6th AMLD into their framework. Some larger financial institutions would have already introduced the regulations into their framework due to the uncertainty of Brexit, but also to align with European legislation for business partners based in Europe.
Despite the United Kingdom opting out of the EU directive, the UK government have said that all organisations operating in the European Union should understand the changes and additions from the 5th AMLD to the 6th AMLD.
The 6th AMLD looks to close gaps in domestic legislation by harmonising the definition of anti-money laundering across EU member states. The new directive also focuses on predicate offences as it increases the list of financial crimes to cover a wider range of crimes not covered in previous directives.
Harmonising the definition of money laundering offences and having a single definition of predicate offences was the first step the 6th AMLD took in addressing concerns from member states. Prior directives often stated restrictions without guidance on how governments and financial institutions should achieve them, leading to delays in implementing new legislation and in organisations waiting for government instruction on how to proceed.
The National Risk Assessment of Money Laundering and Terrorist Financing 2020 sets out standards for the UK and goes further by giving guidance and outlining best practices. The risk assessment covers all areas laid out by the 6th AML Directive and will not cause a change to frontline financial institutions like banks.
22 predicate offences were added to the 6th AMLD including environmental crimes, tax crimes cybercrimes, as well as updating existing offences such as terrorism, trafficking of narcotics, human trafficking, corruption and fraud.
Some of the main changes in the 6th AML Directive and areas covered by the National Risk Assessment of Money Laundering and terrorist financing 2020 are:
- Enhanced due diligence on third party countries. After Brexit, the UK are now classed in this category and will face enhanced due diligence from EU members.
- Increased penalties on single individuals committing money laundering offences.
- Greater liability for legal company owners who fail to implement measures to mitigate AML risk within their organisations by increased fines, suspension from operating as a business and jail terms.
- Government authorities will have the ability to freeze and confiscate proceeds of money laundering as well as any commission generated from illicit funds.
- Co-operation of member states when investigating and prosecuting organisations or individuals.
The 6th AMLD’s emphasis has been on responsibility and prosecution, placing more accountability on Money Laundering Reporting Officers to review their AML programme including training, risk assessment, monitoring, policies and procedures.
Organisations will need to review their compliance policy and procedures to ensure they adhere to new regulations by taking guidance from their governments, building internal controls to safeguard against breaches and conduct assurance.
The new regulations put added pressure on MLRO’s to meet regulator standards with budgets that can run into the millions. Reaching these standards can be achieved by employing financial crime expertise with the employment of technological solutions to reduce an organisation’s risk exposure to money laundering.
SQA Consulting can provide advice and detailed guidance on meeting regulatory requirements by performing quality assurance reviews, alert screening, transaction monitoring and more. For further information, please Contact us