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Sixth anti-money laundering directive –strengthening the preventive framework

  • United Kingdom
  • Fraud and financial crime

26-11-2018

The sixth anti-money laundering directive (MLD6), which complements the criminal law aspects of the fifth anti-money laundering directive adopted earlier this year, was published in the Official Journal of the European Union on 12 November 2018. All EU member states are expected to bring into force the laws and administrative provisions necessary to comply with this directive by 3 December 2020.

Although the UK is expected to withdraw from the EU in March 2019 before the deadline for EU Member States to implement MLD6, the current text of the draft withdrawal agreement includes a transitional or implementation period ending on 31 December 2020, during which the UK would be required to implement EU directives (including both MLD5 and MLD6). The UK may therefore be obliged to implement MLD6 but, even if not, it may choose to do so.

The key provisions of MLD6 are set out below:

  • Unified list of predicate offences

The term ‘predicate offence’ refers to the criminal activity that gives rise to, or underpins, a money laundering offence.  Article 2 of the MLD6 sets out 22 predicate offences which may generate criminal property for the purposes of committing a money laundering offence. These offences are wide-reaching and include environmental crimes, tax crimes and cybercrime, as well as more traditional examples such as the trafficking of drugs and humans, fraud and corruption.

It will not be necessary for there to be a criminal conviction in relation to the predicate offence, and no individual offender will require to be identified in respect of the underlying offence in order to secure a conviction for money laundering. For predicate offences committed in another Member State or third country, the offence must be illegal in both the home State and the other jurisdiction.

The move to define predicate offences is likely to result in an additional burden on regulated firms, including  staff training and monitoring systems to detect signs of predicate offences, as well as suspicious activity linked to money laundering. 

  • Penalties

The minimum prison sentenced is to be increased from one year to four years as well as dissuasive sanctions including: fines; temporary or permanent exclusion from access to public funding; temporary disqualifications from the practice of commercial activities; or temporary bans on running for elected or public office.

Where the laundered property is of high value or derives from certain predicate offences, the circumstances shall be regarded as aggravated, the court may take into account aggravating circumstances when sentencing offenders. 

  • Extension of criminal liability to corporates

Criminal liability is extended to corporates where a money laundering offence is committed for their benefit by an individual in a leading position within that corporate or where a lack of supervision or control by such individual has made possible the commission of a money laundering offence. This is an interesting move towards the wider trend of ‘failure to prevent’ economic crimes such as the UK offences of bribery and corporate facilitation of tax evasion offences introduced over the last decade.

Criminal proceedings may also be brought against perpetrators, inciters or accessories in such money laundering offences committed for the benefit of an organisation as a whole.

  • Confiscation

Authorities will now be required to freeze or confiscate both the proceeds and instrumentalities used in the commission of money laundering offences in order to remove the financial incentives which drive perpetrators.

  • Jurisdiction

Member States will be required to establish their jurisdiction over money laundering offences where the offence is committed in whole or in part on its territory or the offender is one of its nationals. Where an offence falls within the jurisdiction of two Member States, the Member States shall co-operate to centralise proceedings in a single Member State. This provision is in line with the EU’s commitment to enable more efficient and swifter cross-border cooperation between competent authorities.

What is the impact of MLD6 on UK businesses?

Whether or not the UK government implements the MLD6 into national law, these new provisions are of significance to any UK businesses trading with any state that has transposed the directive into domestic legislation. These Member States will have jurisdiction where the offence is committed, wholly or partly, in its territory, or if the offender is an EU national.

If the UK does adopt equivalent legislation, individuals and corporate entities will be in scope for money laundering and predicate offences. Corporates undertaking regulated business across a range of sectors are already faced with the near-herculean task of trying to get on top of the stringent requirements of MLD4 and grappling with the detail of MLD5. The new provisions of MLD6 and, in particular, the corporate offences it envisages, will only serve to add to the already-full plate of most compliance officers.

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