Anti-Money Laundering Directives: Where do we stand?

Simplifying the latest AMLD knowledge

Regulatory directives are here to stay; ignored at great peril!

Within the last 5 years, the European Commission has launched three new directives, all of which aim to create transparency in the financial markets of the EU. Focusing on the regulatory environment and compliance culture across the continent, the Commission’s 4th, 5th, and 6th anti-money laundering directives (AMLD) were each created to target a specific theme within the regulatory context, with later directives building on the earlier.

But, as more and more directives increase the regulations governing an already strict compliance environment, corporations that fail to adopt far stricter AML and KYC practices are incurring millions in penalties and fines.

So what exactly do these new directives involve, and how do we stay risk- (and fine-) free?

The 4AMLD: new rules for existing problems

Aiming to combat corruption, the 4AMLD was introduced in June 2015, and implemented by all EU member states on the 26th of June 2017.

In part, this AMLD was prompted by the 2016 Panama Papers, which highlighted the need for transparency regarding beneficial ownership. And the directive serves exactly that purpose: proposing national ultimate beneficial ownership (UBO) registrars’ rules that require the details of all shareholders with a 25% or more share of a firm to be registered in a central register of beneficiary owners.

The 5AMLD: regulations for the digital era

The 5AMLD built directly upon the fourth directive, further strengthening transparency by introducing regulations to ensure UBO registrars could be publicly accessed.

And, as virtual assets (such as cryptocurrencies, which use blockchain technology that allows for transactional anonymity) began to rocket, the directive also upgraded the European Commission’s regulations to reflect the digital era.

These new regulations tackled a new market, establishing regulations governing cryptocurrency and specific areas of virtual asset service providers. The 5AMD ensured that businesses within the crypto-assets market would be viewed as obliged entities, required to conduct AML and KYC checks on everything from client onboarding to transaction monitoring.

The 6AMLD: more rules, harsher fines

The 6AMLD is the latest addition to the European Commission’s family of regulations.

Released on December 3, 2020, the 6th directive is still relatively new but, like its predecessors, builds on the AML efforts of previous directives. Its main purpose is to strengthen the fight against financial crime, especially those relating to cybercrime and technology.

The 6th directive has initiated harsher sanctions for non-compliance; harmonised EU regulations at a national level; and ensured that firms – especially those operating within high-risk industries and utilising technology – understand the need to upgrade their compliance processes.

Introducing a grand total of 22 new offences, this latest directive still has a long way to go (many of the new offences, such as environmental crime and cybercrime, are a fairly novel concept for EU member states). But its implementation is necessary, and penalties for non-compliance are harsh.

So where do we stand in terms of AMLD implementation?

Many countries are still struggling to adopt the directives – and are, in consequence, incurring the wrath of the European Commission. Just last year, Ireland and Romania were fined €3 million and €2 million euro respectively for failing to adopt the 4AMLD – a directive that should have been fully implemented by 2017!

The Commission expects the 6AMLD to be fully implemented by 2022. And though a number of countries are already there in terms of national-level compliance laws, others are still grappling with the implementation of earlier directives. 

While the Commission has stated that the majority of EU members have adopted the 5AMLD to a level of 70% (Ireland, Hungary, Poland, Czech Republic, Spain, the Netherlands and Belgium are deemed to be partially in line with the fifth directive) there’s still a long way to go.

Today, those firms that wish to create a compliance culture and avoid ever-stricter fines must take extra measures.

Fortunately, as regulations evolve, so does technology. And this has culminated in state-of-the-art regulatory software, or Regtech. Such regulatory technology solutions enable corporations to stay informed of the latest news, laws, and regulations in real-time, while mediating fraud, risk and other criminal activity.

iSPIRAL’s RegTek+ is an onboarding, KYC, and AML platform specifically designed to help companies comply with confidence while remaining ahead of regulatory agencies and in line with directives.

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