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Regtech zooms in on the severe penalties of 6AMLD

Regtech zooms in on the severe penalties of 6AMLD

The European Union’s Sixth Anti-Money Laundering Directive (6AMLD) is due to take effect on 3rd December 2020 and brings with it a suite of substantial penalties for non-compliance. Here’s what you need to be aware of in the run up to the fast-approaching deadline.

EU Member States must have 6AMLD transposed into national legislation by this date and entities are required to implement relevant regulations by 3rd June 2021.

The European Banking Authority (EBA) is overseeing the stringent AML implementation, which clarifies preceding directives by defining offences and penalties to target money-laundering in the digital sphere.

Zac Cohen, general manager of regtech firm and global identity verification company Trulioo explains to Finextra that 6AMLD works to target “individual bad actors within an unsuspecting organisation and clears the path for holding the responsible party accountable.

“Where the entity may have protected the individual or vice versa in the past, the market is now being signalled that controls need to be tightened both internally and externally to ensure that the issue isn’t being propagated.”

Outlining a uniform list of 22 predicate offences, 6AMLD introduces new offences including cybercrime and environmental crime. Significantly, the directive includes ‘aiding and abetting’ and ‘attempting and inciting’ money-laundering, which means that criminal liability will be extended to the natural persons or ‘enablers’ who act as accessories to the criminal activities.

Notably, the extension of liability where ‘the lack of supervision or control’ by a ‘directing mind’ within the organisation means business leaders are exposed to penalties themselves, even if the offender or root of illegal funds cannot be identified.

In line with the implementation of new offences comes a raft of penalties. EU Member states must enforce a minimum prison sentence of four years for money-laundering offences- a substantial increase from the current penalty of one year.

Article 5 of the Directive also states that ‘effective, proportionate and dissuasive criminal penalties’ must be taken, which may include substantial fines, disqualification from practice and even winding-up orders.

Greater obligations are therefore imposed on firms to implement monitoring systems, provide rigorous training for staff and maintain suitable technological capabilities to combat digital threats.

Cohen believes heightened thresholds for AML compliance produce a symbiotic effect on regtech innovation. “The regulatory environment of today is arguably a response to technological innovation, and in order for the current and next generation of innovation to continue, the industry requires regtech tools to provide equally compelling capability.”

Given the fundamentally international nature of money laundering as a cross-jurisdictional issue, Cohen says Trulioo addresses the necessity of “providing tools that are ready and able to be implemented across any business regardless of the internal machinations of that company.

“You want to build with flexibility in mind, and to be able to handle the constantly evolving market changes that we see today with the fourth, fifth, sixth and what’s definitely going to be seventh AML directive down the road.”

In order to tackle the complexity of compliance across departments within organisations, Cohen says that regtech products, particularly when it comes to KYC and AML concerns “must never be a one and done solution; it should be layered and follow the customer lifecycle from end-to-end.

“Talking from a tech perspective, it's about a mind shift in that it's not about just satisfying 6AMLD, it's about satisfying and operating in an environment of change. That's the reality today.”

By Paige McNamee, Junior Reporter, Finextra

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