According to a NASDAQ report into financial crime, in 2023 an estimated $3.1 trillion in illegal funds circulated around the global financial system: “Money laundering accounted for trillions of dollars funding a range of destructive crimes, including an estimated $346.7 billion in human trafficking and $782.9 billion in drug trafficking activity...”
Money laundering is a pervasive and networked crime that is associated with many other offenses. The 6th Anti-Money Laundering Directive (6AMLD) identifies 22 predicate offences of money laundering, including financing of terrorism, drug trafficking, organized crime, corruption, cybercrime, environmental crimes, and human trafficking, among others.
Adopted on May 30, 2024, the directive, along with the Anti-Money Laundering Regulation (AMLR) and the Anti-Money Laundering Authority (AMLA), forms part of a comprehensive European Union AML package aimed at strengthening the region’s defenses against both money laundering and terrorist financing.
6AMLD expands on previous directives by introducing more stringent measures and expanding the scope of anti-money laundering regulations. Its aims include increased collaboration, standardization of terms and offences, addressing gaps in existing frameworks to provide a more robust response to ever-evolving and growing threats from financial crime.
6AMLD introduces several significant changes to previous directives, including an expanded definition of money laundering offences, extended criminal liability to legal persons, and a greater emphasis on cross-border cooperation.
Part of the transformation to facilitate cooperation across member states, and beyond the EU, 6AMLD targets enhancing transparency of beneficial ownership (BO) information, both identifying the different methods of beneficial ownership and providing definitions of beneficial ownership.
3 key components related to the topic of beneficial ownership are:
Member states are now required to implement the directive's provisions within their national laws within 24 months of its publication in the Official Journal of the EU.
Implementing the provisions of the directive includes establishing central registers of beneficial ownership and ensuring these registers are accessible to competent authorities and obliged entities.
The directive also introduces more severe penalties for the 22 predicate money laundering offences. There is now a minimum prison sentence of four years for related offences, which is a significant increase on the previous one-year minimum. Additionally, judges now have the power to impose fines on individuals and exclude entities from accessing public funding if they are found guilty of a money laundering offence.
As discussed, 6AMLD also aims to standardize the definition of money laundering across EU member states, working towards more effective cross-border cooperation and enforcement. This standardization extends to the concept of "aiding and abetting" crimes, which now carries the same legal repercussions as direct involvement in money laundering.
The new directive holds material implications across all three lines of defense, impacting policies, control frameworks as well as systems and data flow architecture and governance. Financial institutions and responsible individuals face increased accountability under 6AMLD. AML programs are already being transformed to address new predicate offences, implement enhanced due diligence measures for high-risk transactions, and ensure compliance with more precise beneficial ownership requirements.
These changes make it important for risk and compliance teams to:
To align with 6AMLD, organizations need to consider comprehensive risk assessments, updating staff training programs, and implementing enhanced reporting mechanisms. Ensuring means to access the most up-to-date beneficial ownership information is also important, along with demonstrating a risk-based approach to AML/CFT compliance and data integrity.
Automated solutions for customer and supplier due diligence, verifying beneficial ownership through seamless checks, ongoing monitoring of risk exposure, and effectiveness of controls are becoming critical, as 6AMLD mandates use of technological solutions to facilitate compliance, particularly for large companies or those operating in multiple markets.
While 6AMLD represents the next advancement of the EU’s AML package, the rapidly changing nature of financial crime could necessitate future updates. Organizations will, no doubt, remain vigilant for potential developments of the international and supranational regulation and guidance.
Data and technology are key to adapting to any future regulations and to more efficient investigations and information sharing. Secure, flexible, and configurable solutions can provide access to up-to-date BO data, automate AML/CFT workflows that change when policies are renewed/updated, support a risk-based approach to compliance, and help facilitate greater transparency.
By harmonizing key definitions, expanding criminal liability, and mandating the use of advanced technologies, 6AMLD aims to continue development of robust and unified approaches to combat money laundering and terrorist financing.
With the implementation of advanced technologies and tools for risk management and compliance, organizations can adapt to the new directive and ensure alignment with its requirements, while also remaining flexible enough to adapt to changes that may still come.
To find out more about: the regulatory background for the 6AMLD; obliged entities; beneficial ownership; beneficial ownership registers and accessing to them, please see our FAQs document.
Moody’s offers a suite of customizable and flexible data-driven solution to help organizations automate their AML and CFT risk management and compliance program. For more information, please get in touch with the Moody’s team – we would love to hear from you.