Do your business also need to implement the AML directive and its subsequent rules? If so, your business needs to know the AML rules and regulations and most importantly the EU AML directives and the AML initiatives and regulations.
No matter what sort of business or organization you are running, the things that matters is your compliance to the AML regulations. Within the complex field of international trade and financial transactions, it is necessary for financial institutions and banks to follow the AML directives.
In this blog, we will talk about different AML and Anti-Money Laundering directives, the need for AML laws and regulations, business that are more subject to AML directives and other regulatory agencies.
Understanding the AML directives
AML directives are rules and regulations established with the consensus of all EU state members to combat money laundering and Terrorist financing. Every country sets rules to fight financial crimes within its jurisdiction, usually based on FAFF guidance. However, in the EU, AML rules are passed by the EU parliament; each member state applies these rules to its countries.
Businesses that are subject to the Anti-money laundering directives.
Though all businesses should follow the AML directives, some must comply with regulatory bodies’ rules and regulations.
- Gaming and Gambling industry
- Financial institutions, particularly the banks
- Law firms and Enforcement agencies.
- Accounting and Finance firms
- Real Estate Managers
6 EU AML Directives
Today, the EU has passed 6 anti-money laundering directives, and the primary purpose behind all these directives is to combat money laundering and terror financing. Let’s understand them one by one:
- 1st EU AML Directive
The first EU AML directive was adopted in 1990. Under this directive, all member states were required to establish intelligence units at their domestic or national level that adhered to customer due diligence requirements. This was believed to be the foundation of all the following AMLD directives.
- 2nd EU AML directives
The second series of AML directives saw some drawbacks in the first one and tried to extend the scope of the CDD regulations. The second AML directives say that every organization, whether a financial institution or a banking sector, must hire external auditors, accountants, and tax advisors for enhanced due diligence measures.
- 3rd EU AML Directives
In 2005, the EU parliament introduced the third AML directive, and this time, the main focus was on strengthening the entire AML farmwork. The parliament introduced the risk-based approach to CDD, stressing that any suspicious activities within the business should be reported to the member state so that strict action can be taken.
- 4th EU AML Directives
After ten years of third directives, in 2005, the EU parliament introduced the fourth AML directive with new CDD measures. The fourth AML directive requires businesses or organizations to identify and verify benefits and PEPs and register the information of beneficial owners. This time, the parliament also devised a new measure to combat terror financing, under which member states were asked to freeze the assets of terrorist groups or entities.
- 5th AML Directives
In 2018, the fifth EU AMLD was introduced, and this time, the particular focus was on the transparency of beneficial ownership information. The parliament strictly ordered businesses and organizations to detect high-risk transactions and the people behind them. For transparency of customer information, a central register of beneficial ownership information was also established for businesses.
- 6th AML Directives
This is the last EU AMLD, adopted in 2021. In their last update of AML directives, they increased the scope of the AML framework and added aiding and abetting, cybercrime, and environmental crime to the list of money laundering. This time, the parliament also introduced the minimum imprisonment for money laundering, which is four years.
What happens if businesses don’t follow the AML Directives?
The action against the non-compliant business and organization is based on how the regulatory agencies uncover the activity and issue. The company might face criticism, penalties, or a report against them by the police. If regulatory bodies find that a business does not need to live its obligations, the company doesn’t need always to face fines or penalties. The reputational damage will be enough for companies with good reputations.
Find Your AML Compliance Partner.
You may not find enough time to comply with all the money laundering directives the EU and other regulatory bodies worldwide give. However, compliance is essential to maintain your business operation for the long run. AML Watcher compliance tool is relatively easy, accurate, and reliable. That not only ensures that your company abides by regulatory rules and regulations but injects the latest monitoring and risk assessment strategies for your business workflow.
Don’t spend too much time screening against the global watchlist, PEPs list, and other sanctioned lists using traditional and manual methods. Join hands with the AML Watcher advanced AI and ML integrated Screening solution for smooth business operations.
