6th Anti-Money Laundering Directive

As the fight against money laundering continues to evolve rapidly, on 12 September 2018, approximately 6 months after the implementation of the 5th EU Anti-Money Laundering Directive (5AMLD), the European Parliament adopted further amendments to the relevant criminal law in order to strengthen and advance the fight against money laundering. Whilst these have a long way to go before they are finalised, there is value in looking now at some of the proposed amendments, such that firms and our clients are aware of what may be needed or expected of them in the near future.

These amendments form the upcoming 6th EU Money Laundering Directive (6AMLD). Whilst the United Kingdom is not subject to or bound by the directive, the 6MLD will be of great interest to a number of Deloitte clients, including, but not limited to our:

  • UK clients who have subsidiaries or clients in Europe; and
  • European clients.

So, what can we expect?

There are a number of proposed amendments which firms operating in EU Member States (including the European Free Trade Association (EFTA)) should be aware of, here we outline five of those amendments to look out for.

1. Unified list of Predicate Crimes

  • A Predicate Crime is a serious crime that is underlying money laundering or terrorist finance activity. The 6MLD provides a unified list of 22 specific Predicate Crimes for money laundering which all EU Member States must criminalise in national legislation (if they have not already done so). Some of the more nuanced Predicate Crimes include, environmental crimes (which itself has not been defined), cybercrime, and direct and indirect tax crimes.
  • In unambiguously defining the scope of Predicate Crimes, both EU Member States and firms will be required to develop an intimate understanding of the Predicate Crimes, the relevant risk factors, and typologies involved if they are to begin the process of implementing the provision into domestic legislation and regulation. In particular, firms should wish to consider the extent to which their enterprise risk assessment and risk appetite may be impacted. In addition, firms may need to consider the additional knowledge and/ or controls that may need to be put into place as a result of this change.

2. Extension of Criminal liability to organisations 

  • One of the more significant amendments under the directive relates to the extension of criminal liability to organisations, such as companies or partnerships and the representatives or controlling minds of those organisations. More specifically, the directive dictates that where representatives or controlling minds of an organisation are either aware of the underlying criminal activity or do not provide appropriate supervision or control over employee activities which enables the money laundering offence, these individuals will be held liable and can be prosecuted.
  • As such, this will require firms to ensure their governance and oversight arrangements are reviewed and bolstered where necessary, to avoid falling foul of this provision. Should an organisation be found criminally liable for money laundering offences, irreparable reputational and financial loss may result.

3. Increased international co-operation for prosecution of money laundering  

  • In line with the 5AMLD, the EU is committed to combatting money laundering by ‘enabling more efficient and swifter cross-border co-operation between competent authorities’. Under the 6AMLD, EU Member States (including EFTA) and third countries (simply put, countries outside the European Economic Area) will be expected to share information in an effective and timely manner in accordance with national law, if more than one Member State and can validly prosecute on the basis of the same facts.

4. Requirement for Dual Criminality 

  • The directive introduces the requirement of ‘Dual Criminality’ for the offence of money laundering, which requires the offence to be unlawful both in the country where the offence takes place and by reference to the laws of the jurisdiction in which the offence of money laundering is committed.
  • While the distinction appears to be insignificant, it can in fact make a material difference in relation to requirements to report certain types of predicate activity, for example tax evasion, which now falls under the scope of Predicate Crimes.

5. Enhanced punitive measures  

  • The 6AMLD introduces tougher punishments for individuals convicted of money laundering offences. More specifically, the directive has increased the minimum prison sentence for money laundering offences from one year to four years, alongside a variety of other dissuasive sanctions. For example, the directive includes the possible prohibition from public welfare benefits for a prescribed period of time, a temporary, or even permanent ban from conducting business, a compulsory winding-up of the organisation and a temporary or permanent closure of establishments which were used for committing the offence.

What happens next?

The directive will undergo the European legislative process following the first reading (12 September 2018). Once the European Parliament and European Council have reached an agreement on the final text, the directive will be formally adopted and published in the European Journal. Thereafter, EU Member States will have two years to implement 6AMLD into domestic legislation.

The 6AMLD signifies the European Union’s continued resolve in protecting the integrity of the financial system by strengthening the fight against money laundering. As the directive progresses through the legislative process, the RegEx team will keep you informed of the latest developments, so watch this space!

 

 

Katie

Katie Jackson – Partner, Deloitte Forensic, Financial Crime

Katie is a Partner in Deloitte Forensic. She has over 10 years’ experience working in the Financial Services sector, principally specialising in Financial Crime. She has a particular focus on anti-money laundering (AML) and financial sanctions, supporting clients to comply with regulatory obligations and keep abreast of industry good practice. More recently, she has been supporting projects looking to redesign financial crime target operating models.

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Chris

Chris Clements – Partner, Deloitte Forensic, Financial Crime

Chris Clements is a partner in Deloitte’s forensic practice, and has a breadth of experience in international arbitration, expert witness and determination work. Chris has been instructed in over 30 UK High Court and International Arbitration matters under a number of different rules, including LCIA, ICC, JARB, and DIAC and has given expert evidence in international arbitrations in the UK, Canada, India and France, as well as domestic tribunals, adjudications. He has also led a number of high profile accounting investigations that have led to him appearing in front of public committees and in court prosecutions. Chris takes appointments as arbitrator, determiner and mediator. He holds membership at the Expert Witness Institute, the Academy of Experts, the Chartered Institute of Arbitrators, and the Society of Construction Law and has been named as a leading International Arbitration Expert Witness in Who’s Who Legal for 2019.

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Emma

Emma Hardaker – Director, Deloitte Forensic, Financial Crime

Emma has more than 15 years’ experience in anti-financial crime in financial institutions. She has been MLRO for two organisations, including for Deloitte, and has assessed, reviewed and advised on various aspects of the anti-financial crime frameworks for a range of bank and non-bank financial institutions.

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