6th AML Directive – What is expected

AML is the most rapid legislation which directly impacts the businesses and their behavior in the European union (hereinafter – EU). Therefore, to comply with them it is very important to remain in a good legal shape and in the content of law not to be penalized. So, what is AML and why it is so important to stay compliant in the terms of its regulations?

As the time is elapsing the majority, if not all, EU businesses require to comply with new Anti-Money Laundering (hereinafter – AML) rules.

AMLD6 is an EU Directive number 2018/1673 of the EU and is the sixth since 1991, thus it was arranged to be transmitted into national laws by December 3rd, 2020.  Therefore, the deadline for companies within EU markets to control their internal procedures henceforth is June 3rd, 2021. Consequently, to this new date the financial institutions, and other obliged entities must update their Know Your Customer (hereinafter – KYC) procedures accordingly.  

Why we need additional legislation if there are plenty of them already? Throughout the existence of the AML legislations which already are operating it seems that there are still some obstacles that countries are still missing to implement for them to be effective. The recent banking scandals and the illicit funds coming from abroad affecting internal tax system just highlight the lack in cooperation and the need to standardize the definition of crimes and enact them throughout EU. Hence one of the aims of 6AMLD is to fight against crimes, provides the clear definition of each crimes (22 primary offenses related to money laundering), also it notifies the companies, as they are the major player in economic arena, to pay attention to them to avoid crimes.

So, what do regulators expect businesses to accomplish and what this new directive will bring into their performance? Let us review the major impacts per below:

• Cyber Crime

As the current world is becoming more digital and all the solutions to sustain them are transferring into technological solutions, the AMLD emphasizes the importance to mention it into legislations. Cybercrime previously was not debated in this area; therefore, it is a critical issue for companies to grasp this knowledge. The focus of this area is to reduce crimes online. Hence, the cybercrime facilitates companies effectively address any potential money laundering activity. Cooperation between the business also becomes crucial in the respect of preventing the crime. Hence, if the violation occurs between two businesses, they will have to collaborate to identify the criminal and prosecute singly. Thus, collaboration must be emphasized on a business decision.  

• Illegal Accountability 

As previously all the penalties were issued to the Board or Upper Management, hence for the first time, companies will become liable for the crimes in the line with the legal persons. Meaning, that if a person classified as a “legal person” within your business has failed to prevent criminal activities from occurring, that person and your business may be penalized for the act. The criminal liability will be identified on management and on the company itselfas well.

• Risk Evaluation

Although the risk-based approach was introduced with the 4AMLD, and centralized storage of the information related to beneficial ownership, the essential conduct on a whole enterprise-wide risk assessment was established. A comprehensive risk assessment should be performed to identify and effectively reduce any risk the business is exposed to. When making a risk assessment, it should be paid attention to some issues. For example, determining the fundamental risks is one of the company’s most critical threats. Additionally, it is important to review the internal controls of the businesses: to overcome the potential weaknesses and whenever necessary to strengthen them. After the internal control was conducted and managed, it is important for the company’s security to look at the various types of risks that the entity may be subjected to, including regulatory, reputational, and liability risks. 

• Educating the Team 

In relation to the upcoming regulation possibly one of the most critical matters companies must accomplish is train their employees. It is becoming crucial that every employee would have a proper mindset which would facilitate the reporting system within the organization. Therefore, everyone in the company should be aware of this. Additionally, another important concern is transparency. Company employees must be transparent in reporting. 

What Can You Do to Be Ready?

The newly approaching 6AMLD should enhance your existing AML monitoring processes. Hence, the efficiency, security, and compliance are the main measures of KYC solution. Everything you might need to collect documents, assess risk-profiles, track and monitor information is recommended to integrate into the software solutions to facilitate the efficiency of the business. However, it would still be reasonable to fight against internal and external risks to avoid repetitional, regulatory, and liability-related matters. At this stage Afacomp would be a great solution to mitigate the risks.

Inga Vaitkunskaite
Senior Compliance Officer