Money laundering and the financing of terrorism and organised crime are prominent problems which can go on to damage the integrity, stability and reputation of the financial sector and in turn, threaten the internal security of a country. By December 2020, the European Union’s fight against these activities will undoubtedly step up a gear as the 6th Anti-Money Laundering Directive is transposed into law across all EU Member States.
The European Parliament believes that measures adopted at national or even at Union level would have very limited effect if international coordination and cooperation were absent. The new Directive aims to combat money laundering by means of criminal law, going on to enable swifter and more efficient transnational cooperation between the competent authorities. Furthermore, where two Member States each have jurisdiction over the prosecution of an offence, they are required to collaborate and agree to prosecute in a single Member State.
Scope of the 6th AML Directive
The Directive aims to have a uniform definition for criminal activities which constitute predicate offences for money laundering. In turn, this ensures that money laundering activities are subjected to effective, proportionate and dissuasive criminal penalties. There are 22 predicate offences in total, which go on to include cybercrime as well as environmental crime. This, indubitably, reflects the dynamic nature of the threat landscape and the Union’s shifting priorities.
The Directive defines the term ‘criminal activity’ as any kind of criminal involvement in the commission of any offence punishable by imprisonment. Member States are required to criminalise money laundering arising from six specified predicate offences, even if the conduct constituting those predicate offences was lawful in the jurisdiction in which it was committed. The six specified offences include the participation in an organised criminal group and racketeering, terrorism, trafficking in human beings and migrant smuggling, sexual exploitation (including of children), illicit trafficking in narcotics and psychotropic substances, and corruption.
- A money laundering offence is to be punishable as a criminal offence if the following activities are involved: the conversion of transfer of property, with prior knowledge that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of that person’s action;
- the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from criminal activity;
- the acquisition, possession or use of property, knowing at the time of receipt, that such property was derived from criminal activity.
Additionally, the scope of money laundering is now to include ‘aiding and abetting’.
The Directive’s Implications
The Directive will now make it possible to extend the concept of criminal liability to legal persons and will not solely subject the natural person. Companies or partnerships, having failed to prevent illegal activity conducted by a ‘directing mind’ within the company, will be subject to criminal penalties. An individual or legal person may still go on to be convicted, even if the criminal activity that generated the illicit funds cannot be identified.
Member States are also required to update the way in which money launderers are convicted. All states are to set a maximum imprisonment term of at least four years for the abovementioned offences. Nevertheless, any sentence may be supplemented with effective or proportionate sanctions, which may also be combined with fines.
Penalties for money laundering offences could include prohibition from public welfare benefits, bans from conducting business or forced wind-up of businesses through which the offences were committed.
Regulated entities within the European economic zone will have until January 2021 to implement the relevant regulations.
It remains to be seen what the EU’s next steps will be. We may see a 7th AMLD on the horizon or even possibly the EU’s first Anti-Money Laundering Regulation which would thus have direct effect across all EU Member States. What is certain is that as the EU analyses further the AML implications of cryptocurrencies, this will require further regulation on certain providers in this space that were not captured under the 5th AML Directive.
Article written by Dr Cherise Abela Grech and Legal Trainee Ms Emma Sammut.
For more information on AML obligations and compliance matters please contact Mr Reuben Portanier on firstname.lastname@example.org
Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.