The number of money laundering offenses police recorded reached a new high in Germany in 2023. According to Statista, the number rose from 8,942 cases in 2020 to 32,573 cases in 2023. Experts estimate the volume of money laundering worldwide at up to $2 trillion USD—a challenge for legislators and companies.

The 6th EU Anti-Money Laundering Directive (6AMLD) presents new challenges and opportunities in the fight against money laundering. This article explains what companies need to know and implement.

What’s in this article?

• What is the 6th EU Anti-Money Laundering Directive (6AMLD)?
  
• What is the goal of the directive?
  
• Who must follow the new directive?
  
• What is the history of money laundering directives?
  
• What has changed with 6AMLD?
  
• What do companies need to know?
  

What is the 6th EU Anti-Money Laundering Directive (6AMLD)?

The Official Journal of the EU published 6AMLD on June 10, 2024. EU member states must incorporate the directive into national law by July 10, 2027. 6AMLD introduces key regulations to combat money laundering and terrorist financing. Essentially, it builds on the previous money laundering directives, expands their requirements, and takes even stricter measures against criminal activities.

What is the goal of the directive?

The main objective of 6AMLD is to detect criminal activities more effectively, close existing loopholes from the previous version (5AMLD), and strengthen international cooperation in the fight against money laundering.

One focus is on improving the organization of national anti-money laundering systems and supporting more efficient cooperation between financial intelligence units (FIUs) and supervisory authorities. Companies and institutions must adapt their internal control and compliance systems to the new requirements to meet these increased demands.

In the future, FIUs and relevant authorities will be more efficient and faster at identifying money laundering schemes so companies can freeze and protect assets. For this purpose, both FIUs and the relevant authorities should have access to data on beneficial owners. So-called “obliged entities” provide this information. They include banks, asset managers (including crypto asset managers), and real estate agents (including virtual agents).

The beneficial owner registers (BO registers) store recordings of information on beneficial owners of certain foreign legal entities. For the real estate sector, this regulation applies retroactively for a period of up to 10 years.

Monitoring compliance with 6AMLD

The European Central Bank (ECB) works closely with national supervisory authorities to ensure compliance with EU directives and their implementation into national law. The ECB acts as a coordinator and information broker for cross-border measures against money laundering.

The ECB has no power to take action in the event of 6AMLD breaches. However, it can request national supervisory authorities to initiate sanction proceedings. The responsible authorities primarily include the Federal Financial Supervisory Authority (BaFin) and the FIU. All parties must report suspected cases of money laundering and terrorist financing to these national authorities. Since the 6AMLD also affects nonfinancial sectors such as real estate brokers, state authorities are also involved in the monitoring.

Who must follow the new directive?

6AMLD affects a significantly larger number of companies and institutions than its predecessors. This includes the following entities:

• Financial institutions: In the future, banks, insurance companies, and other financial service providers will have to comply with even stricter due diligence obligations. They must also report suspicious transactions immediately.

• Crypto providers: Restricting the anonymity of transactions on the crypto market is important for the fight against money laundering and terrorist financing. To achieve this, service providers in this market must adhere to new regulations.

• Companies: There can be no concealment with regard to ownership and beneficial owners. Companies must disclose relevant data and processes transparently.

• Real estate agents: Real estate agents must report their clients’ suspicious activities.

• Law firms or notaries: When it comes to financial transactions, law firms and notaries have an obligation to report suspected cases of money laundering.

• Suppliers of luxury goods: Suppliers of luxury goods—such as precious metals, watches, gold, luxury cars, or aircraft—will have to apply stricter due diligence obligations toward their customers in the future.

• The soccer industry: The soccer industry has a high risk of money laundering. The measures therefore also affect professional clubs and agents. Since not every country assesses the risk of money laundering in this area the same way, member states can also exempt those in the soccer industry from the regulations.

What is the history of money laundering directives?

With the introduction of 6AMLD, the EU is introducing even stricter regulations in the fight against financial crime and for a stronger European financial system. In the past, the focus of new money laundering guidelines has always been on specific topics:

European money laundering directives over time

• 1991: Fight against drug trafficking
  
• 2001: Addition of banks, financial service providers, and nonfinancial organizations
  
• 2005: Counterterrorism and even stricter due diligence obligations
  
• 2015: Measures against high cash payments to combat money laundering and terrorism
  
• 2018: Crypto market
  

What has changed with 6AMLD?

Here are some of the key changes coming into effect with 6AMLD:

• More precise definition of the predicate offense: The 6AMLD specifies the legal basis for predicate offenses to money laundering, thereby creating a uniform regulation in the EU. In total, the catalogue now includes 22 specific criminal offenses that the measures designate as predicate offenses.

• Additional predicate offenses: The measure also adds new areas such as cybercrime and environmental crimes. Likewise, the measure specifically includes aiding and abetting to make any involvement in money laundering activities punishable. Relevant criminal offenses include but are not limited to: tax offenses, cybercrime, environmental violations, human trafficking, bribery, and corruption.

• More severe consequences: Violations of 6AMLD are subject to severe sanctions—fines, closure of the business, or prison sentences of up to four years. In addition, after the conviction, violators cannot receive public benefits or aid. Each member state also has the possibility to impose further sanctions.

• Extended scope: Unlike 5AMLD, the provisions of 6AMLD also affect legal entities. This includes companies and organisations that carry out certain financial transactions or offer services that could potentially be misused for money laundering or terrorist financing. This is intended to close weaknesses in the existing regulations and create a standardised protection framework for the European financial market.

• Focus on international cooperation: New measures will facilitate the exchange of information between EU member states. For example, the measures will introduce a central register for bank accounts and safe deposit boxes that authorities can access.

• Enhanced due diligence obligations: Particularly strict security regulations apply to politically exposed persons (PEPs) and countries with a high risk of money laundering. Financial institutions are obliged to carry out extended checks to verify the origin of funds and the identity of the persons involved in more detail. This often includes continuous monitoring of transactions to recognise suspicious activities at an early stage. In addition, companies must ensure that no business relationships with persons or institutions are on international sanction lists.

• Unified transaction records: Until now, different forms of transaction recording have made the work of authorities more difficult in financial investigations. A uniform format should ensure significantly easier processing and analysis of this data in the future.

What do companies need to know?

6AMLD tightens both due diligence obligations and potential penalties for noncompliance with the guidelines. It is now all the more important for companies to adapt internal processes and guidelines and to improve compliance structures and internal fraud risk management to bring it up to date.

Stripe Radar can help, thanks to its innovative technology and machine learning for effective fraud prevention. Radar offers protective measures that you can adapt to your company’s requirements.

How to comply with the requirements of 6AMLD

Companies should consider the following points, among others:

• Extended due diligence obligations: Companies must adapt their internal control and compliance systems to ensure increased transaction monitoring and risk management. Among other things, this includes a more detailed review of customers and their beneficial owners.

• Increased due diligence measures: Companies should further optimize their due diligence procedures in order to meet the requirements of 6AMLD. This requires a comprehensive and regular review of new and existing customers to ensure no illegal money flows into the economic cycle.

• Regular auditing: The audit includes the identification of the contractual partner, the review of representative bodies, and the structure of ownership and control. A central component is the clarification of the beneficial owner, as well as the verification of PEP status and the comparison with sanction lists. These measures are part of the so-called “Know Your Customer” (KYC) check and are important for identifying risk factors at an early stage and, if necessary, initiating further measures to prevent money laundering.

• Extended scope of application: Since 6AMLD also affects legal entities, companies must adapt their internal processes to correctly implement all anti-money laundering measures.

• Transparent disclosure of beneficial owners: Companies must ensure that they have access to information about the actual beneficial owners of their customers. This also includes the obligation to keep such data in appropriate registers. In the case of foreign legal entities in particular, businesses should keep corresponding information in the BO registers to ensure complete transparency.

• Increased transaction monitoring: Companies need to extend transaction monitoring and analysis to include suspicious patterns. This includes checking against sanction lists and verifying transactions in real time to detect money laundering and terrorist financing at an early stage.

• Use of modern technologies: The use of technologies such as artificial intelligence (AI) and machine learning is important to meet increasing demands. Automated identity verification, multifactor authentication, and transaction monitoring through digital tools can increase accuracy and reduce manual work.

• Obligation to cooperate with supervisory authorities: Companies must cooperate when working with the relevant supervisory authorities and the FIU to exchange information and identify potential risks at an early stage.

• Timely adaptation of internal processes: Companies must regularly review their internal policies and processes and adapt them to new legal requirements. This applies in particular to the documentation and archiving of transactions as well as to the traceability of decisions in accordance with the new rules.

• Training and education of employees: It is important that all relevant employees receive regular training to understand the new requirements and implement them correctly. Companies should ensure their compliance departments are up-to-date and that they train employees in identifying and reporting suspicious activity. In addition, the company should take advantage of any training the government provides to stay informed of new regulations.

• Increased documentation requirements: Companies must maintain comprehensive records of all due diligence activities, transactions, and decisions. This will be necessary for both internal audits and audits by regulatory authorities.