Malta: A Brief Appreciation Of The 6th AML Directive

The EU's unwavering commitment to comprehensively combat threats posed by Money Laundering (and funding of Terrorism) across the Union has been further strengthened by the 6th Anti-Money Laundering Directive (which entered into force on the 3rd of December 2020).

It is envisaged that by the 3rd of June 2021, all obliged entities, jurisdictions, and authorities within the EU will be fully aligned to the requirements of the Directive accordingly. In fact, as acknowledged in paragraph 22, the objective of this Directive is namely 'to subject money laundering in all Member States to effective, proportionate and dissuasive criminal penalties' - an act that cannot be sufficiently achieved by Member States alone but (by reason of the scale and effects of this Directive) can be better achieved at Union level.

The purposes of this article will be to provide all readers, clients and AML/KYC specialists with a brief appreciation of the salient features of Directive (EU) 2018/1673 of the European Parliament and of the Council on combating money laundering through criminal law procedures. The impact of these new changes thereof will also be briefly scrutinised throughout the analysis of this new directive.

Predicate Offences.

Within the context of Predicate Offences, Malta already adopts & implements what is colloquially referred to as an all-crimes regime. Broadly speaking, this roughly implies that any criminal activity from which funds are derived/generated from could be the subject of a Money Laundering investigation.

However, what the EU plans to address through this Directive is the cross-border applicability of a concerted & harmonised list of predicate offences - which will mitigate against any interpretive problems caused by law enforcement/prosecutors across the EU (Tax Crimes also fall within scope of this Directive, however, the EU is aware that tax crimes definitions differ across all Member states and the Directive will not seek 'to harmonise the definitions of tax crimes in national law').

More importantly, the aforementioned trail of thought is enshrined in the Directive wherein it is mentioned that 'differences between the definitions of predicate offences in national law should not hinder international cooperation in criminal proceedings regarding money laundering.'

So much so, that the Directive reiterates that Member States should 'ensure that all offences that are punishable by a term of imprisonment as set out in this Directive are considered predicate offences for money laundering.' The Directive, therefore, imposes an obligation on all its Members to ensure that the offences listed and classified in the Directive will unequivocally constitute a predicate offence for the crime of Money Laundering.

Criminal Acts.

In this connection, Article 2(1) of the Directive formally establishes a list of 22 predicate offences accordingly - with the hope of developing one harmonised approach/interpretation throughout the EU by stating that 'offences within the following categories are considered a criminal activity', these being:

Expanding the scope of liability to 'legal persons'.

An interesting addition is Article 7 of the Directive, which expands the scope of liability to now also include legal persons - wherein said entities may also be held accountable for offences 'committed for their benefit by any person' based on either a power of representation of the legal person, any form of authority to take decisions on behalf of the legal person and/or an authority/mandate to exercise control within the legal person.

Moreover, the Directive requests Member States to take all the necessary measures to ensure that legal persons can be found liable where the lack of supervision/control by any person acting for an on behalf of the entity 'has made possible the commission of any of the offences' mentioned throughout the Directive which benefit the legal person.

In this connection, Article 8 also mentions possible sanctions that may be levied against Legal persons such as exclusion from entitlement to public benefits/aid, temporary or permanent disqualification from the practice of commercial activities, judicial winding up orders or permanent closure of establishments used for the commission of that offence.

Increased sanctions and tougher punishments.

The 'rationale' of this Directive is such that Member States should endeavour to consider 'including more severe penalties for public office holders in their national frameworks in accordance with their legal traditions.' - (as evidenced in Paragraph 7)

The juxtaposition with paragraph 14 is evident, wherein the latter article also states that each Member State should also afford additional 'sanctions or measures, such as fines, temporary or permanent exclusion from access to public funding, including tender procedures, grants and concessions, temporary disqualifications from the practice of commercial activities or temporary bans on running for elected or public office'.

Within this context, Member States should also strongly consider enabling confiscation of assets in all cases where it is not difficult or impractical to commence or conclude criminal proceedings, including in cases where the offender has passed away.

Cooperation between Member States.

The fight against Money Laundering (and funding of terrorism) relies heavily on the goodwill and collaboration amongst primarily Financial Intelligence Units, Governments and Law Enforcement Agencies. This modus operandi is what the EU aspires to achieve with the Directive reiterating that Member States should cooperate and assist each other in the 'widest possible way'.

Moreover, information should be shared, disseminated, and exchanged in an effective and bona fide manner. International co-operation with third countries 'should be intensified' and the Directive recommends that Member States support 'the establishment of effective measures and mechanisms' to combat Money Laundering.

Contextually, 'Member States should ensure that certain types of money laundering activities are also punishable when committed by the perpetrator of the criminal activity that generated the property (a concept known as 'self-laundering'). Additionally, this Directive also aims to criminalise money laundering 'when it is committed intentionally and with the knowledge that the property was derived from criminal activity'.

To also note that the Directive requests that one should not distinguish between situations where property has been derived 'directly from criminal activity and situations where it has been derived indirectly from criminal activity' - and this is line with the broad definition of 'proceeds' as laid down in Directive 2014/42/EU (which primarily deals with the freezing and confiscation of instrumentalities and proceeds of crime in the European Union).

Punitive Measures & Emerging Threats.

Paragraph 14 of the Directive mentions that 'in order to deter money laundering throughout the Union, Member States should ensure that it is punishable by a maximum term of imprisonment of at least four years'.

It is interesting to note, and appreciate, that in Malta, acts of Money Laundering are punishable by an imprisonment term of 18 years or a fine not exceeding ?2,500,000, or both and this in terms of article 3(1) of the Prevention of Money Laundering Act (PMLA). It is, therefore, safe to say, that Malta implements the provisions of this Directive 'over and above' what is required as a minimum standard.

Finally, building on previous concerns, as also echoed in the Supranational Risk Assessment (and 5th Anti-Money Laundering Directive), reference is made to Virtual Currencies which 'present new risks and challenges from the perspective of combating Money Laundering' and that Member States should ensure those risks are mitigated accordingly through appropriate Risk Management tools/controls.

Conclusion

Whilst Denmark, the UK and Ireland are not taking part in the adoption of this Directive and are not bound by it or subject to its application (i.e. they are not obliged to transpose the 6AMLD), the obligation on all other Member States, to effectively transpose and adopt these requirements is of paramount importance.

More significantly, in light of more onerous obligations imposed on Member States, all obliged entities (subject persons), should ensure that fundamental principles of AML Risk Management (such as embracing and adopting the Risk Based Approach, conducting effective Customer Due Diligence & Monitoring, ensuring proper Record-keeping procedures and keeping up to date with latest Money Laundering typologies, (including threats and vulnerabilities) through training, should form the core of an effective AML/CFT Programme which can help instil a 'Culture of Compliance & Risk' throughout the organisation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.