22 Predicate Offenses
The EU’s Sixth Money Laundering Directive (6AMLD) will close certain loopholes in member-states’ domestic legislation by harmonizing the definition of money laundering across the bloc. 6AMLD places a particular focus on ‘predicate offenses’: when it is introduced on 3 June 2021, 6AMLD will expand its list of money laundering predicate offenses to better reflect the modern threat landscape.
To prepare for the Directive’s implementation, institutions should make themselves familiar with the changes it introduces.
What are Predicate Offenses?
The term ‘predicate offense’ refers to crimes which are components of a larger crime. In a financial context, that likely means any crime that generates monetary proceeds that predicate the subsequent crime of money laundering. The financial proceeds from fraud or counterfeiting, for example, need to be laundered in order to transform them into legitimate currency.
6AMLD: Expands Predicate Offenses
6AMLD will replace 5AMLD and be transposed into law across all member-states on 3 December 2020 – and must be implemented in those territories by 3 June 2021. In more detail, 6AMLD defines and expands the list of crimes that qualify as money laundering predicate offenses:
- 6AMLD defines and standardizes 22 predicate offenses for money laundering in all EU member states.
- The expanded list of 6AMLD predicate offenses now includes cybercrime and environmental crime. 6AMLD also harmonizes the definition of other predicate offenses, including:
- Human trafficking/smuggling
- Murder and GBH
- Tax crime
- Insider trading
- Under 6AMLD, aiding and abetting money laundering, and self-laundering now also constitute criminal acts.
Adverse Media Categorization
The broad spectrum of money laundering predicate offenses set out in 6AMLD means that financial institutions must adjust their adverse media screening process to ensure they identify the appropriate breaking news stories.
Given the time-consuming and labor-intensive work involved in that process, adverse media categorization is a valuable efficiency tool that allows institutions to sort and prioritize news stories and gauge the degree to which the adverse media changes a client’s risk profile. Categorization complements automated screening, helping to reduce employee workloads and transform an institution’s ongoing compliance performance.
Adverse media categorization is a valuable KYC tool, especially since the FATF recommendations state that financial institutions must “understand their client’s reputation”, including previous criminal liabilities like involvement in money laundering investigations. Compliance with that direction requires adverse media screening – which traditionally involves time-consuming manual checks of vast, unsorted amounts of news reports, blog articles, and social media.
It’s important to make sure that any adverse media monitoring tool used is capable of identifying media by specific categories. This cuts down on noise and keeps alerts focused on what’s relevant by avoiding false positives. Depending on the risk-based approach businesses are taking it may also be prudent to receive different alerts based on different categories to make it easier for compliance officers to discover what’s relevant.
Categorizing adverse media allows firms to prioritize that workload, and gauge the level of risk associated with each client more efficiently. Negative news categorization may also better facilitate automated screening, in which searches can be further tailored to client profiles and regulatory environments. Automation allows firms to identify and assess adverse media, reduce false positives, and maintain the level of compliance performance that regulators expect.