This year’s Kroll Fraud and Financial Crime Report found companies are growing increasingly concerned that third parties are driving a higher risk of financial crime. We read through the report to pull...
Millions of companies around the world have been impacted by regulations which mandate them to carry out ESG and human rights due diligence (HRDD in the last few years–or they soon will be. These regulations...
From Stricter Sanctions to Broken Supply Chains: What the Ukrainian War has Meant for Third Party Risk Management February 2024 will mark two years since the latest conflict in Ukraine began. As well...
Third parties help companies to deliver their products and services, but they also expose them to regulatory, financial, strategic and reputational risks. In the latest blog in our third party risk series...
Financial crimes such as bribery, corruption and money laundering are becoming more common and more complex. One of the most common reasons for a company becoming implicated in alleged financial crime...
The European Union's Sixth Anti-Money Laundering Directive (6AMLD) came into effect in all EU member states in December 2020, and it must be enforced by all regulated financial institutions by 3rd June 2021. Companies operating in Europe—and multinationals based in the U.S.—must ensure their due diligence and risk monitoring processes are aligned to meet the new requirements, or risk incurring legal, financial, reputational, and strategic costs.
6AMLD imposes stricter requirements on companies to tackle financial crime and identify hidden beneficial ownership, and harsher penalties for those who fail with expanded criminal liability and punishments for money laundering offences. Its key provisions include:
The Directive is designed to encourage enforcement agencies in different EU countries to work together on anti-bribery and corruption investigations. It says: “This Directive aims to combat money laundering by means of criminal law, enabling more efficient and swifter cross-border cooperation between competent authorities.”
The Directive follows the general trend of more and stricter financial crime legislation around the world. The EU’s previous (fifth) Anti-Money Laundering Directive only came into force last year. But it isn’t just Europe where regulations are tightening. For example:
“The pressure [on companies] has never been greater with the clear direction of travel being that AML and counter terrorism financing is at the top of the regulatory agenda," Jonathan Ritson-Candler, associate at the law firm Latham & Watkins tells Financier Worldwide.
The new requirements imposed by 6AMLD come at a particularly challenging time for corporate compliance teams. For those in financial institutions, their Know-Your-Customer and client verification processes have had to be carried out entirely digitally during the pandemic. Compliance teams will often visit a potentially high-risk third party to carry out enhanced due diligence , but this is impossible in countries where travel has been restricted by the virus.
Jennifer L. Sutton, Special Counsel at Sullivan & Cromwell LLP, adds: “With government stay at-home mandates and closures, customers are increasingly availing themselves of online banking solutions, leading to greater risks associated with customer due diligence and verification.”
This challenge did not delay the introduction of 6AMLD, however, and companies should not assume regulators will allow more leeway despite the unusual circumstances. Instead, there will be an increased expectation for companies to better harness technology to support the entire risk management workflow.
Companies need to understand the specific requirements of 6AMLD to ensure they are compliant. But an effective compliance process should not simply tick the boxes of regulatory requirements. It should follow general best practices, which include:
Related Pages: