EU 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.
The most recent EU anti money laundering directive is 6AMLD, replacing 5AMLD and 4AMLD before that. Every directive adds to or updates regulatory obligations on member-state governments. The details of the most recent anti money laundering directives are as follows:
Implementation date: 26 June 2017
The Fourth Anti Money Laundering Directive broadly focused on aligning EU policy with AML/CFT guidelines from the Financial Action Task Force (FATF).
Wider regulatory scope: 4AMLD expanded the regulatory scope of AML/CFT legislation, imposing customer due diligence obligations (CDD) on many previously unregulated firms, including all gambling services, all credit and financial institutions and many designated non-financial businesses and professions (DNFBP). Similarly, 4AMLD expanded CDD obligations to certain types of transaction and financial products, including transactions outside of business relationships and, for the first time, some e-money products.
Beneficial ownership: 4AMLD introduced requirements for EU countries to record ultimate beneficial ownership (UBO) information in centralized registers and adjusted the definition of ultimate beneficial ownership to include senior management officials. Record-keeping requirements were also introduced for trustees of express trusts.
Expansion of the risk-based approach: 4AMLD significantly strengthened criteria for the risk-based approach to money laundering, requiring firms to factor geographic locations, products, services, types of transactions and delivery channels into their customer risk profiles.
Tax crimes: 4AMLD made tax crimes predicate offenses for money laundering and brought legal advice under the scope of AML/CFT reporting obligations.
Politically exposed persons: 4AMLD expanded the definition of a politically exposed person (PEP) to include domestic PEPs.
Implementation date: 10 January 2020
5AMLD 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.
Prepaid cards: 5AMLD reduced the previous transaction limit on prepaid cards to €150, and to €50 for online transactions. Transactions from prepaid cards issued outside the EU were prohibited unless they were issued in a territory with EU-equivalent AML/CFT standards.
High value goods: Under 5AMLD, traders in high–value goods, such as artwork, became subject to AML/CFT reporting obligations and CDD measures when engaging in transactions of €10,000 or more. To help combat terror financing, historical, cultural and archaeological artifacts also fell under the high-value AML/CFT rules.
Beneficial ownership: Under 5AMLD, centralized UBO registers were made publicly accessible while a requirement for private UBO registers for bank accounts was introduced. EU member states were required to make their UBO lists inter-connected across countries and to strengthen their verification mechanisms.
High-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.
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.
Implementation date: 3 June 2021
6AMLD provides EU member states with clarification on emerging money laundering threats, defining the regulatory requirements introduced in 5AMLD in greater detail.
Harmonization: When it comes into effect, 6AMLD will provide a harmonized definition of money laundering across all EU countries in order to close loopholes in domestic legislation. That harmonization includes an expanded list of 22 money laundering predicate offenses, including cybercrime, environmental crime, tax crime and human trafficking and smuggling.
Additional offenses: 6AMLD will add “aiding and abetting” to the list of activities that are categorized as money laundering.
Extension of criminal liability: Under 6AMLD, criminal liability for money laundering will be extended to include legal persons (companies and partnerships) in situations where those persons have failed to prevent illegal activity.
Tougher punishment: 6AMLD will increase the sentence for money laundering crimes to a minimum of 4 years imprisonment.