AML: Complying with the 6th Money Laundering Directive (6 MLD) in a Post-Brexit and Remote-Working World
The Headlines
The 5th Money Laundering Directive (5 MLD) is old hat now, and we’re all on board with the post-Brexit version, the less snappily titled ‘Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017’. This includes the associated amendments that have also worked their way through the UK legislative process.
Unfortunately, it doesn’t end there. It is natural that in the continual game of catch-up which the authorities play with the criminals, we must adapt- preferably more quickly than they do. With the Financial Action Task Force highlighting the ways criminals are exploiting the COVID 19 crisis and expanding their list of countries to come under increased monitoring, focus will be on this area for some time to come.
In this short article, we would like to give you a short horizon-scanning piece for what will be expected of you and your firm in the international world of financial crime and punishment through 2021. (And what we haven’t yet done from 5 MLD)
EU Changes
The 6th Money Laundering Directive (6 MLD) brings the EU club that bit closer in the fight against financial crime, a club that the UK is no longer part of, but one we will hopefully continue to do business with for many years to come.
Before we get to 6 MLD, we still have to finish 5 MLD. June is not far off, and June 2021 is the deadline for the introduction of the integrated EU Ultimate Beneficial Owner (UBO) register. In the UK, authorities still haven’t published guidelines on what needs to be done and how it will be managed on this side of the channel. (Admittedly, EU states are not ahead of us in that regard.)
The 6 MLD is a considerable step towards harmonisation across the EU, ironically by drawing substantially from UK legislation, with one key exception, corporate criminal liability.
The UK has not published its position on changing the law to simplify the route to find companies criminally liable when their employees take part in money laundering activities. Future changes could affect both the Bribery Act and the Criminal Finances Act at a time when so much is already under review.
The EU is bringing a list of 22 predicate offences to be used by all nations that link to money laundering as well as standard definitions of money laundering itself. It also requires member states to include offences related to aiding and abetting money launderers, rather than only those that perpetrated the original crime. New minimum sentencing guidelines and penalties will make money laundering less attractive in some states, too.
It’s interesting to note that in cross-border cases, 6 MLD requires an offence to be illegal in both states for it to be considered predicate to money laundering. An Amsterdam coffee shop owner with a perfectly legal side-line in more esoteric smoking products should be able to open a bank account in Dublin in the near future.
US Changes
The Financial Crimes Enforcement Network, FinCEN, published a proposal with the Federal Reserve at the end of last year, seeking to dramatically reduce the value of transactions which financial institutions must report as potentially suspicious, from $3,000 to $250. Although small payments can be used in terrorist financing and drug deals, this could lead to a huge increase in manual reviews carried out within these organisations.
The US doesn’t escape from the international drive against money laundering either, and in a country where federal interference has been fiercely opposed, the changes here are far reaching also.
The Anti-Money Laundering Act of 2020 ("AMLA") and the Corporate Transparency Act ("CTA") work together to allow federal authorities to follow the trail of illegal funds more easily, throughout the US and abroad.
Beneficial Ownership identification rules will come in during 2022, reflecting the international push in that area, while new ‘safe harbor’ rules provide additional protection from criminal liability when cooperating with law enforcement immediately. The US trend to monetary awards to whistle-blowers continues, with increased limits on sums given.
Of more interest to UK organisations are the increases in authority for the US Treasury and Department of Justice regarding the acquisition of records held by foreign finance companies. Bank accounts held outside of the US are now fair game in the search for evidence, in not only criminal and AML investigations, but civil forfeiture actions too.
So, were it to be the case that, say, the US authorities were investigating the funding of a Scottish golf course by a prominent former government official, records can be obtained far more easily.
The information flow won’t be all one-way, with plans to appoint six Treasury Attaches in US embassies to coordinate and facilitate AML relationships with key central banks and law enforcement agencies.
Cooperation outside of the US in AML and countering terrorist financing seems to be on the cards. Firms may be pushed to share their Suspicious Activity Reports with subsidiaries in some other jurisdictions, with the US Treasury seeking to set up pilot programs over the coming year. In the EU and UK, this would presumably mean the automatic disclosure to the authorities here.
In Conclusion
In the COVID-19, remote-working, post-Brexit world, the authorities have their hands full. This is exactly the time we need to concentrate on ensuring our organisations are robust in protecting themselves against money launderers, but also ensuring that they stay on the right side of the law themselves.
The Access Group’s industry-leading governance, risk and compliance regulatory content for financial services is produced, updated and maintained in partnership with our regulatory experts UK Finance, FSTP (Financial Services Training Providers) and Chartered Insurance Institute (CII).
Discover more about our Anti-money Laundering and Countering Terrorist Financing and Maintaining Information and Cyber Security eLearning courses in our GRC eLearning for Financial Services training suite, to help protect your firm from money launderers.
