25 Feb 2019
With its publication in the Official Journal of the European Union in late 2018, the Sixth EU Anti-Money Laundering Directive (6AMLD) is now on its way.
Member-states have until December 2020 to transpose the directive into domestic law—an effort that would standardize criteria across the economic bloc for when predicate offences can give rise to money laundering charges and related criminal sanctions.
Under the directive, compliant EU nations will adopt a list of 22 predicate crimes to which money laundering charges can be appended, including “counterfeiting and piracy of products,” smuggling and cybercrime. For the first time, member-states must outlaw so-called “self laundering,” a term describing when individuals use the proceeds of their own criminal acts for entrepreneurial purposes.
Firms would be well advised to review the list of offences and consider how they may be able to identify proceeds from these illegal activities. It is likely that staff training will have to be updated.
The directive also clarifies that convictions of predicate offences are not necessary prerequisites for money laundering cases, and that predicate crimes committed anywhere in the world can be cited in domestic money laundering cases, provided that the acts are outlawed by a member-state.
However, for some predicate offences committed in another part of the EU, a member-state may require that such offences are also illegal in the other nation.
Aiding, abetting, inciting or attempting the main money laundering offences are, themselves, criminal offences, under the directive.
Consistent with EU jurisprudence, 6AMLD requires that, for individuals, offences shall be punished by “effective, proportionate and dissuasive” criminal penalties.
The directive specifies that there shall be a maximum prison sentence of at least four years following convictions of the main money laundering offences.
The maximum sentences must be increased where a criminal organisation or a firm regulated for money laundering purposes commits a money laundering offence, EU officials said.
Member-states may also hand down longer prison sentences when the “laundered property is of a considerable value” or the laundered property derives from a particular subset of the 22 underlying predicate offences.
6AMLD introduces a corporate offence for instances when an entity benefits from money laundering committed by a natural person who has the power to represent the organisation, authority to take decisions on behalf of the organisation or who otherwise exercises control within the organisation.
Furthermore, member-states shall ensure organisations can be held accountable for the failure to control senior persons who may attract criminal liability.
The identification principle
Where an organisation has been found to be criminally liable, the relevant individuals may also be prosecuted for committing money laundering offences, EU officials said.
The mandate follows recent amendments to UK law that clarified that corporations can be held criminally liable for offences only in cases when prosecutors can prove that its senior leaders were aware of the violations and failed to take corrective action.
This “identification principle,” as it called, currently presents a significant threshold to prosecuting large companies with thousands of employees, as is it very unlikely that the directors would be aware of the actions of junior staff within the organisation.
For this reason, some commentators believe that large companies are almost “above the law,” which may itself generate a contempt by staff, including senior managers, within large companies for the law and its obligations.
It will be interesting to see how the UK government proceeds, in light of the directive, with the current debate on introducing a corporate “failure-to-prevent” economic crime offence.
The directive again requires “effective, proportionate and dissuasive” sanctions against organisations, which may include exclusion from public benefits or aid, exclusion from public funding or tendering, a temporary or permanent prohibition on commercial activities, a judicial winding-up order or the closure of relevant units that committed the offence.
Finally, member-states shall freeze or confiscate proceeds derived from the commission of offences.
6AMLD’s extraterritorial reach could have a significant impact. Under the mandate, member-states can extend their jurisdiction to include money laundering offences committed by their nationals or for the benefit of domestic organisations domiciled in their territories, no matter where in the world the offences were committed.
When two or more member-states claim jurisdiction for a money laundering offence, they shall cooperate in deciding which of them will prosecute the offenders, according to the directive.
Financial crime staff would be well advised to monitor how their domestic legislatures transpose 6AMLD.
The UK, assuming there is a Withdrawal Agreement with the EU, will possibly have to implement the directive. It is likely that the legislation adopting 6AMLD will provide an opportunity to address issues cited in the country’s mutual evaluation by the Financial Action Task Force.
Finally, in light of recent events at Danske, Deutsche Bank, Nordea, ABLV and Pilatus Bank, it may be prudent to assume that further EU legislation will be proposed to enhance the fight against money laundering and terrorist financing.
We may well see 7AMLD appearing over the horizon.
Alternatively, we may see the First EU Money Laundering Regulation emanating from Brussels, which would have direct effect on all member-states without the national parliaments being given the opportunity to debate the proposed legislation.
We live in interesting times!
Denis O’Connor is both a Fellow of the Institute of Chartered Accountants in England & Wales and the Chartered Institute of Securities and Investment. He was a member of the British Bankers’ Association Money Laundering Committee from 2003 -10; and a member of the JMLSG’s Board and Editorial Panel between 2010 and 2016.
He has been a frequent speaker at industry conferences on financial crime issues, both in the UK and abroad.
This article is expressing personal opinions and is meant for information purposes only. The article does not intend to replace professional or legal advice. It is recommended that readers seek independent professional or legal advice, or speak to authorised persons/organisations.
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