In a decisive move to bolster financial security, the European Union recently adopted a comprehensive package aimed at combating money laundering and terrorist financing. The sixth Anti-Money Laundering Directive (6AMLD), officially known as Directive (EU) 2018/1673, is a significant step in the EU’s ongoing efforts to strengthen the integrity of its financial systems and protect against financial crimes.
“The basis of effective AML work begins with a good understanding of one’s risks, threats, and vulnerabilities, with the general risk assessment being of the utmost importance,” says George M. Mangion, senior partner at PKF Malta. This sentiment encapsulates the directive’s core objective: to ensure entities understand and mitigate their exposure to financial crime risks.
A pivotal feature of the 6AMLD is its expansion of the scope of entities required to conduct due diligence and report suspicious activities. Notably, it now includes the majority of the crypto sector, traders of luxury goods, and high-risk industries such as professional football clubs. This broadening of scope aims to address the evolving landscape of financial crime, particularly as digital currencies and high-value goods become more prominent targets for money laundering.
Crypto-asset service providers (CASPs) are now mandated to apply due diligence measures for transactions of €1,000 or more. This move reflects the growing recognition of cryptocurrencies as both legitimate financial instruments and potential vehicles for illicit activities. The directive also places increased responsibilities on financial institutions, online gaming companies, and cash-intensive businesses, which are seen as particularly vulnerable to money laundering and terrorist financing activities.
Among the key reforms, 6AMLD harmonises the definition of money laundering offences across EU member states, standardising the list of 22 predicate offences that include tax crimes, environmental crime, and cybercrime. This harmonisation is designed to create a unified approach to tackling financial crime, though the directive has not been applied in the UK.
Another significant change is the extension of liability to legal entities, meaning companies, not just individuals, can be held accountable for money laundering if they benefit from such activities. Stricter penalties have also been introduced, with individuals facing a minimum of four years imprisonment and companies subject to various sanctions, including exclusion from public benefits and judicial winding-up orders.
A notable innovation in 6AMLD is the criminalisation of aiding, abetting, inciting, and attempting money laundering offences. This ensures that those who facilitate or encourage financial crimes face legal repercussions. Additionally, the directive emphasises the importance of cooperation and information-sharing between member states to foster a coordinated approach to investigating and prosecuting money laundering offences.
The principle of dual criminality introduced in 6AMLD mandates that the predicate offence must be a crime in both the prosecuting EU member state and the country where the offence was committed. This principle aims to streamline international legal processes and enhance the effectiveness of cross-border financial crime investigations.
As the directive seeks to keep pace with emerging threats, it specifically addresses new challenges such as environmental crime and cybercrime. The rise of cybercrime, exacerbated by the Covid-19 pandemic, has become a major concern, with criminals increasingly exploiting digital platforms for illicit activities. The cost of cybercrime-related money laundering is projected to reach $10.5 trillion by 2025, highlighting the urgent need for robust regulatory measures.
The 6AMLD represents a significant enhancement of the EU’s framework for combating money laundering and terrorist financing. However, effective implementation and compliance will require concerted efforts from businesses and regulatory authorities alike. Entities must adopt a risk-based approach, conducting enhanced due diligence for high-risk clients and transactions to ensure compliance with the new regulations.
For businesses seeking guidance on the implications of 6AMLD, PKF Malta offers tailored advice and training. George M. Mangion and his team are available to assist firms in navigating these complex regulatory changes and ensuring they meet their obligations under the new directive.
For more information or to schedule a consultation, contact PKF Academy at academy@pkfmalta.com.
