Anti Money Laundering in EuropeEU anti money laundering directives are issued periodically by the European Parliament to be implemented by member states as part of domestic legislation.

The European anti-money laundering directives (AMLD) are intended to prevent money laundering or terrorist financing and establish a consistent regulatory environment across the EU. This is done by addressing the emerging money laundering and terrorist financing typologies, helping to close AML compliance gaps.

When the EU issues an anti money laundering directive, it also sets an implementation date by which appropriate AML/CFT legislation must be in place within member states. Since implementation periods can last several years, new money laundering and terrorism financing threats may emerge during that time: accordingly, the EU issues new anti money laundering directives regularly to reflect changes in criminal methodology and in AML/CFT best practices.

Anti Money Laundering in Europe

6th AMLD Implementation

date: 3 June 2021

The escalation in money laundering and terrorist financing has led to heightened awareness of the potential effects of money laundering. This also led the European Union to enact its First Directive to combat money laundering in 1991 (Council Directive 91/308/EEC).

1991

1st AMLD2 Second Directive. Directive 2001/97/EC of the European Parliament and of the Council of the European Union of 4 December 2001 [2]. The Second Directive amended and updated the First Directive on the prevention of the use of the financial system for the purpose of money laundering.

2001

2nd AMLDOn 7 June 2005, the Council of Ministers of the EU gave its political approval to a new directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing 2 . The Council approval followed the opinion of the European Parliament on 26 May 20053 .

3rd AMLD

2005

The Fourth EU AML Directive started to be worked on in early 2015. The final deadline was in mid 2017. The purpose of the Directive is to remove any ambiguities in the previous legislation and improve consistency AML/CTF rules across all EU Member States and also align it with the Financial Action Task Force (FATF)

4th AMLD 5th AMLD

2017

The Directive (EU) 2018/843 on the prevention of the use of the financialsystem for the purposes of money laundering or terrorist financing ("AML 5")1 entered into force on July 9, 2018.

2020

The Fifth Anti Money Laundering Directive5AMLD shares much of 4AMLD’s focus with provisions to strengthen and expand existing regulations and new regulatory measures for cryptocurrencies.

Cryptocurrency: 5AMLD introduced a legal definition of cryptocurrency and brought both cryptocurrencies and cryptocurrency exchanges under the scope of existing AML/CFT regulations. Under 5AMLD, providers of cryptocurrency services had to register with financial authorities, and financial intelligence units (FIU) were given powers to obtain the names and addresses of owners of cryptocurrency.

Politically exposed persons: 5AMLD introduced a requirement for member states to release publicly available functional PEP lists, while the EU also released its own EU-level PEP list. The functional lists contain domestic positions that are considered politically exposed but do not contain the names of the individuals filling them.

CRYPTO PEPHigh-risk countries: 5AMLD introduced a requirement for firms to perform mandatory enhanced due diligence (EDD) on customers from high-risk third countries in order to better manage AML/CFT deficiencies.

EDD

The 6th Anti Money Laundering Directive● Coming into force on the 3rd of june 2021.

● Will provide a harmonized definition of money laundering across all EU countries in order to close loopholes in domestic legislation.

● Will add “aiding and abetting” to the list of activities that are categorized as money laundering.

● Will increase the sentence for money laundering crimes to a minimum of 4 years imprisonment.

The 6th Anti Money Laundering Directive● Coming into force on the 3rd of june 2021.

● Will provide a harmonized definition of money laundering across all EU countries in order to close loopholes in domestic legislation.

● Will add “aiding and abetting” to the list of activities that are categorized as money laundering.

● Will increase the sentence for money laundering crimes to a minimum of 4 years imprisonment.

The 6th Anti Money Laundering Directive● Coming into force on the 3rd of june 2021.

● Will provide a harmonized definition of money laundering across all EU countries in order to close loopholes in domestic legislation.

● Will add “aiding and abetting” to the list of activities that are categorized as money laundering.

● Will increase the sentence for money laundering crimes to a minimum of 4 years imprisonment.

The 6th Anti Money Laundering Directive● Coming into force on the 3rd of june 2021.

● Will provide a harmonized definition of money laundering across all EU countries in order to close loopholes in domestic legislation.

● Will add “aiding and abetting” to the list of activities that are categorized as money laundering.

● Will increase the sentence for money laundering crimes to a minimum of 4 years imprisonment.

Customer Due DiligenceThere are a lot of jargon and technicalities and abbreviations in Financial Regulations but if you hard handling money you need to understand the following:

● If you are getting money, you need to understand where it is coming from?● If you are sending money, who is it going to?● Who am I partnering with?● Regardless if you are a big or small fintech, you need to know who your third party

suppliers are.

Sanction listsOne of the highest risk categories for any organisation is to make sure they are not doing business with someone who is on a sanction list.

● There are 65 sanction authorities in the world.

● There are 700 sanction lists around the world.

● The lists are not often in syn which mean one person can exist on many lists but with different spellings.

● Very complicated with a lot of risk for any organisation.

AML Transaction monitoring is software that monitors financial transactions to identify potential money laundering practices. Transaction monitoring systems can increase a financial institution's ability to detect suspicious activity faster and more effectively. In financial transactions, Transaction Monitoring marks the transaction or group of transactions as a warning when any customer performs a possible transaction, and these alarms should be considered for further investigation. Not all suspicious alerts created by Transaction Monitoring may be actual risk alarms. These alarms are called False Positive Alarms.

False Positives

FATF TRAVEL RULE● Known as the Travel Rule, FATF Travel Rule requires Virtual Asset Service

Providers (VASPs) such as cryptocurrency exchanges, digital wallet providers and even some financial institutions including banks dealing with crypto assets, to ensure that certain customer data is disclosed and transferred between counterparties.

● Example of interpretation in Schweiz - All outgoing transactions from Crypto Service Providers need to be identified, even it goes to private ledger key holder.

● Europe is sceptic towards the Travel Rule.

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/anti-money-laundering-and-counter-terrorist-financing_en