EU Directive on combating money laundering by criminal law
News    ·   19-02-2021
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AUTHOR: Diane Bugeja; Peter Mizzi

On the 3rd of December 2020, Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering by criminal law (also known as the ”6AMLD”) came into force. The directive aims to enable financial institutions and authorities to do even more in their fight against money laundering (ML) and terrorism financing (TF), by closing gaps and loopholes in existing legislation, clarifying regulatory details and toughening criminal penalties across the EU.

The key changes are as follows;

Harmonisation of Predicate Offences and Expanded Regulatory Scope

The definition of criminal activities which constitute predicate offences for money laundering, and the punishments attaching thereto, are not necessarily uniform in all Member States. Therefore, these differences in the definitions of predicate offences in national law were found to be hindering international cooperation in criminal proceedings regarding money laundering – criminals were able to exploit.

The directive harmonises the definition of money laundering across the EU with the primary aim being to remove any loopholes in the national legislations across the union. To this end it provides for 22 predicate offences that now constitute money laundering across all the EU, including certain tax crimes, environmental crimes, cybercrime and self-laundering. 

Since the local framework under the Prevention of Money Laundering Act provides for an ‘all-crimes’ regime which does not restrict those offences that can give rise to money laundering offence, this will not necessitate any changes to the current definition.

Furthermore, the directive expands the number of offences that fall under the definition of money laundering, with “aiding, abetting and inciting of ML” and thus subject to the same penalties and offences.

Equivalent offences are already in force in terms of the Prevention of Money Laundering Act (PMLA).

Extension of Criminal Liability

Legal persons can be held liable for the mandated offences where a person with a leading position within a legal person commits the offence for the benefit of the legal person. The current Maltese law position is that where a money laundering offence is committed by a body of persons, every person who, at the time of the commission of the offence, was a director, manager, secretary or other similar officer of such body or association, or was purporting to act in any such capacity, shall be guilty of that offence unless he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent the commission of the offence.

Legal persons may also be held liable where the lack of supervision or control by a person referred to above has made possible the commission of the ML offence for the benefit of that legal person by a person under its authority. In fact, in terms of articles 121D and 248E of the Criminal Code, the person found guilty as aforesaid shall be deemed to be vested with the legal representation of the same body corporate which shall be liable to the payment of a fine (multa) of not less than ten thousand euro (€10,000) and not exceeding two million euro (€2,000,000).

Therefore, increased accountability falls on senior executives within firms, to ensure that they or other persons similar positions do not commit ML offences.

Sanctions shall include criminal or non-criminal fines and may include other sanctions, such as:

-          exclusion from entitlement to public benefits or aid;

-          temporary or permanent exclusion from access to public funding, including tender procedures, grants and concessions;

-          temporary or permanent disqualification from the practice of commercial activities;

-          placing under judicial supervision;

-          a judicial winding-up order;

-          temporary or permanent closure of establishments which have been used for committing the offence.

Punishment for ML offences

The minimum imprisonment infringement to be penalised with maximum sentence of at least 4 years; Maltese law currently provides for maximum sentence of 18 years for equivalent conduct in terms of the Prevention of Money Laundering Act.

Member-state Cooperation

Where two Member States each have jurisdiction over the prosecution of an offence, they are required to collaborate and agree to prosecute in a single Member State.

For this purpose, account shall be taken of the following factors:

-          the territory of the Member State on which the offence was committed;

-          the nationality or residency of the offender;

-          the country of origin of the victim or victims; and

-          the territory on which the offender was found.

Overall, it can be concluded that most of the changes in this directive are already transposed into Maltese legislation and firms should have sound knowledge in this regard. Nevertheless, firms must identify any existing compliance gaps and have them rectified quickly. Practical steps need to be taken to implement policies, enforce their compliance and monitor effectiveness.

Among others, firms shall conduct training for employees and adjust their AML programs to ensure that employees are trained to detect risk factors and typologies that may arise. Defences should centre on reasonable procedures designed to prevent persons in leading positions from committing ML offences - firms must consider if governance and oversight mechanisms are sufficiently robust to gain comfort that any illicit activities by senior staff members can be identified, and better still, prevented. However, this is not just a matter of updating policies, procedures and training, but also includes updating of monitoring systems.

 

 

 

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