While the EU has been busy with the Covid-19 pandemic, ESMA has been busy with the implementation of 5 AMLD by each Member State in the Union, and the EU Commission has been preoccupied by Council of Europe meetings, the implementation of 6 AMLD has been drawing much nearer than anticipated.
5 AMLD has caused a whirlwind once it was implemented by the EU Member States, and has managed to rock many financial institutions such as EMIs, crypto exchanges and SPIs.
Yet, while those institutions may have thought they have finished their regulatory duties towards their respective regulator, it is not the case.
The EU Commission (hereinafter- Commission) has adopted a new Directive to tackle money laundering in the EU, and the deadline for implementation is fastly approaching.
The new Directive (6 AMLD) will replace the current AML Framework in the EU and the current Directive (5 AMLD). The deadline for implementation for the Member States is December 3rd 2020. By this, not only the Member States will have to adjust their local laws, but also the financial institutions in the EU will have to adhere to the new AML framework.
What does the 6 AMLD entail?
- Criminal Liability- legal and natural persons which are registered as UBOs/ nominee directors will fall under intense scrutiny for criminal liability in the respective Member States.
- The conversion/ transfer of property deriving from countries from outside the EU will undergo even more intense scrutiny.
- Aiding/ abetting or even attempting to conduct alleged money laundering activity will be punishable (in the respective Member State) as a criminal offence.
- Member States will not be able to issue mitigated circumstances penalties, and are obliged to issue proportionate and dissuasive criminal penalties.
- Member States are under the strict obligation to issue additional sanctions for money laundering.
- Specific sanctions for legal persons include enhanced judicial enforcement, closing of the institution and increased fines.
By this, 6 AMLD changes the legal sphere by crossing paths with the criminal realm in the EU, but also ensuring closure of the institutions that will not comply with the new framework and the imposition of fines on said institutions.
This also means that the current AML practices and policies that are imposed currently in your financial institution are not in conformity with the new laws, and as such, will be deemed non-compliant by the EU Regulator.
EMIs and financial institutions that are licensed in the UK will also have to comply with the new regulatory framework, although the fact that the FCA will no longer be under ESMA’s inspection and supervision.
While the December deadline seem quite far, it is imperative that financial institutions, crypto currency exchanges and EMIs will comply with the new regulatory framework prior to December 2020, or they risk fines and criminal liability.
Author: Ella Rosenberg