According to recent analyses, such as a report from NASDAQ, financial crime continues to funnel a staggering $3.1 trillion through the global financial system annually.
This illicit flow includes significant amounts from grave offenses like human trafficking, estimated at $346.7m, and drug trafficking, which accounts for $782.9m, according to Moody’s.
The 6th Anti-Money Laundering Directive (6AMLD), effective as of May 30, 2024, marks a significant stride in Europe’s battle against these crimes. The directive, part of an extensive Anti-Money Laundering (AML) package by the European Union, seeks to fortify the region’s defenses against money laundering and terrorism financing.
This includes the Anti-Money Laundering Regulation (AMLR) and the establishment of the Anti-Money Laundering Authority (AMLA).
This iteration of the directive introduces more rigorous measures and broadens the anti-money laundering regulations’ scope. The directive’s design aims to foster increased cooperation and standardization across EU states, closing gaps in existing frameworks to more effectively tackle the evolving threats posed by financial crime.
A key aspect of 6AMLD is its expanded definition of money laundering offences and the extended criminal liability it introduces to legal entities. The directive also emphasizes enhanced cross-border collaboration, targeting increased transparency of beneficial ownership information. This includes clearer definitions and methods of identifying beneficial ownership, along with mandates for maintaining central registers.
Member states are obligated to incorporate the directive’s stipulations into their national laws within two years of its announcement. This includes the establishment of central registers for beneficial ownership accessible to authorities and obligated entities.
The new directive significantly toughens the penalties associated with money laundering offences, setting a minimum four-year prison term for such crimes, a marked increase from the previous one-year minimum. Judicial powers have also been expanded, allowing for the imposition of fines and exclusion from public funding for convicted entities.
Furthermore, 6AMLD aims to standardize the definition of money laundering across member states, enhancing the effectiveness of cross-border cooperation and enforcement. This includes equating “aiding and abetting” these crimes to direct involvement.
The directive impacts all lines of defense within financial institutions, affecting policies, control frameworks, and system and data governance. Compliance officers and financial institutions are thus under increased scrutiny and accountability to adapt their AML strategies to comply with the new regulations.
For risk and compliance professionals, this means updating AML and counter-financing of terrorism (CFT) policies, enhancing due diligence processes, and strengthening systems for transaction monitoring and beneficial ownership verification.
Looking ahead, the dynamic nature of financial crime means future updates to AML directives are likely. Organizations must remain alert to changes in international and supranational regulations and guidance. Utilizing data and technology will be crucial in adapting to and efficiently complying with any new regulations, ensuring continued effectiveness in combating financial crimes.
With the adoption of cutting-edge technologies and tools, entities can align with 6AMLD requirements, maintaining flexibility to adapt to potential future changes in the regulatory landscape.
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