The sixth of the EU money laundering directives came into force in December 2020, and regulations apply to businesses operating within the EU. 6AMLD will be transposed into national law in December, and those outside the EU will have until June 2021 to set up their processes. So, how will companies prepare for this directive?
EU Anti-Money Laundering Directives
Directives started in 1990 are prepared by the European Union. Each directive contains increasingly stringent regulations for money laundering. The purpose of the directives is to counter cybercrime and the financing of terrorism more effectively. The reason for the renewal of the directives is to add measures against the system's natural developments. With the recent banking scandals in the EU and the increasing requirements for AML in the private sector, regulators felt the need for innovations.
Besides, it has been noted that the increase in drug and human trafficking crimes worldwide and organized crime groups such as the environment and wildlife continue their activities through money laundering. Regulators must always keep themselves up to date to prevent these crimes.
What does the directive include? The most important topics of the arrangement are;
- It will provide a more exact definition of crimes and punishments.
- Criminal liability will be imposed on legal persons and companies with harsher penalties.
- Businesses need to cooperate in the prosecution of money laundering crimes.
- They will need to protect customers from cybercrime and combat terrorism financing.
- To eliminate money laundering, cybercrime will be fought.
- It has been stated that virtual currencies present new risks and challenges in combating money laundering.
One of the aims of 6AMLD is to combat some precursor crimes. 6AMLD provides lists of 22 primary offenses related to money laundering. And it provides clear definitions of each of these crimes. It alerts companies to draw attention to and avoid these crimes.
So What Do Regulators Expect Companies To Do?
For existing regulated businesses, the changes fall into some main ones. We will explain these below.
Cyber Crime
Cybercrime was never mentioned in the previous AMLD. Therefore, this is a critical issue for businesses. Reducing the number of online crimes that occur is an important focus. Cybercrime is at the forefront of regulators' minds and helps companies effectively pinpoint and address any potential money laundering activity. Cooperation Businesses are expected to cooperate after the new 6 AMLD comes into force. This cooperation is crucial in the prosecution of crimes. If the offense occurs between two businesses, they will have to work together to identify the criminal and prosecute singly.
Criminal Liability
For the first time, companies can be held responsible for crimes. However, legal persons can also be held accountable for the crime. This means that if a person classified as a "legal person" within your important business has failed to prevent criminal activities from happening, that person and your business may be punished for the act.
Risk Assessment
It is essential for companies to conduct an enterprise-wide risk assessment. A comprehensive risk assessment should be conducted to identify and effectively reduce risk. When making a risk assessment, they should pay attention to some issues. For example, determining the "inherent" risks is one of the company's most critical threats. This is the first step of the risk assessment. Also, when applying 6AMLD, it determines how it will affect a firm's natural risk profile.
The next step after the assessment of the inherent risks is to review the internal controls. This step should look at existing internal controls to determine if they are sufficient to reduce inherent risks from 6MLD. It helps mandatory entities identify where potential weaknesses may arise and which existing controls need to be updated or strengthened. After controlling all these, it is now beneficial for the company's security to look at the various types of risks that the liable entity may be exposed to, including regulatory, reputational, and liability risks.
Documents Control
What companies need to do in this regard is to check and update policies, procedures, and other relevant documents if necessary. A new directive brings about many document and rule changes. Companies must be meticulous in this document editing business. However, records held with third parties may also need to be reviewed. A possible breach of documents by companies can make them guilty.
Training the Team
Perhaps one of the most important things companies have to do is train their employees on the new directive. It has become more important than ever for regulated companies to have a robust reporting system. Therefore, everyone in the company should be aware of this. On the one hand, another important issue is transparency. Company employees must be transparent in reporting.
How Can Sanction Scanner Help Your Company?
As Sanction Scanner, we ensure that financial companies are protected from money laundering and terrorist financing thanks to our developed system. The services we provide within our products' scope are AML Name Scanner, Transaction Monitoring, and Adverse Media. With our software, companies can easily integrate them, perform scans, set rules, and generate alarms.
