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And now for 6MLD: The Sixth Money Laundering Directive

6MLD Already?

4 March 2020

It seems that the UK has only fairly recently familiarised itself with the EU’s Fourth Money Laundering Directive (4MLD) implemented by way of the Money Laundering Regulations 2017 (MLR2017). However, just a short while after 4MLD was published, the law makers realised it needed additional amendments in order to catch up with the criminals - resulting in the fifth instalment, 5MLD - and our latest UK Money Laundering Regulations 2019 (MLR2019) that became effective on 10 January 2020.

This was the date when the 5th Money Laundering Directive became applicable across the EU and member states had to transpose it into national law. Now, only a few weeks later, it is already seems time to focus upon the next instalment: 6MLD with a deadline having been set for transposition at the end of this year.

5MLD: Brief Summary

5MLD introduced amendments to the European money laundering rules to extend the scope to cryptocurrency exchanges and wallet providers. It also extended the scope to those doing similar works to auditors and accounts or traders in goods that require payment of €10,000 and more, such as art dealers or estate agents acting as intermediaries.

5MLD also lowered the thresholds for electronic money and prepaid instruments such as anonymous payment cards and enhances the transparency on beneficial owners.

Enhanced Due Diligence (EDD) measures are also further improved for high risk third countries.

So is it really time for 6MLD?

Despite 5MLD having only just been transposed into local law throughout Europe, lawmakers have already lined up the sixth instalment, the 6th Money Laundering Directive (6MLD) that was published on 23 October 2018 and is required to be transposed into national law by EU member states by 3rd December 2020. Regulated entities operating within Europe will then have until June 2021 to implement the relevant new rules.

But what changes does 6MLD look to introduce and what should firms be doing now? 

In particular, 6MLD looks to set to introduce the following key points:

• Money Laundering Offences – Harmonised Definition & Explanation
• Money Laundering Offences – Expanded to include Aiding & Abetting
• Extension of Criminal Liability to ‘Legal Persons’ and Sanctions
• Tougher Penalties: Increased Penalties for Natural Persons

Money Laundering Offences: A Harmonises Definition & Explanation

6MLD looks to provide a harmonised definition of what constitute money laundering offences to ensure that any weak wording or loopholes in domestic legislation is removed.

There are 22 predicate offences which now include cybercrime and environmental crime.

Money Laundering Offences Expanded: Aiding & Abetting

6MLD will expand the criminal offences of money laundering to include the following intentional conduct:

• acquiring, possessing or using property knowing, at the time it is received, that it had come from criminal activity;
• transferring or converting property, or assets of any kind, knowing that it is the product of criminal activity, to hide or disguise its illicit origin or to assist anybody involved to evade the legal consequences of their actions;
• hiding or disguising the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that it came from criminal activity;
• aiding and abetting, inciting and attempting these offences.

As you can see, this list now includes aiding and abetting, thus will look to include the group of people often known as ‘enablers’ making it easier to pursue those individuals who act as accomplices in the money laundering process.

Extension of Criminal Liability to Legal Persons

Under 6MLD, one of the most significant changes is the extension of criminal liability to legal persons (i.e. companies or partnerships) where they failed to prevent illegal activity undertaken by a ‘directing mind’ within the company.

It should also be noted that even if the criminal activity that generated illicit funds cannot be fully or partially identified, an individual or legal person can still be convicted.

Tougher Penalties

There is increased emphasis on conviction in the latest directive with the minimum term set for more than 6 months, with all states being required to set imprisonment of a minimum of four years for money laundering offences, which is an increase from one year, as it was previously.

Furthermore, any sentence may be supplemented with ‘effective, proportionate and dissuasive sanctions’ which may be combined with fines and might include such actions as:

• the full shut-down of a business
• exclusion from public benefits or aid
• disqualification from carrying out commercial activities
• judicial supervision
• freezing or confiscating the property concerned

Next Steps:

Given the implications the new directive might have on compliance processes, as well as future business growth opportunities, it would be wise for businesses to familiarise themselves with the changes 6MLD will introduce.

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