December 7, 2022
The days of non-compliance are over. The recent regulations have created a new era for businesses. They must implement robust methods to verify customer identity and Anti Money Laundering (AML) practices if they want to stay in the game. Let’s zoom i
The European Union (EU)'s Sixth Anti-Money Laundering Directive - commonly known as the "6AMLD" - came into force in June 2021. The 6AMLD builds on the EU's previous efforts to combat money laundering and terrorist financing and contains four key elements that businesses in the EU should be aware of.
The 6AMLD defines 22 predicate crimes that should be included in national legislation, including tax and cybercrimes. To comply with this directive, businesses must implement appropriate control mechanisms to prevent and detect money laundering activities. Furthermore, they will need to assess whether or not they are willing to take on the risks associated with doing business in the EU.
This legislation extends criminal liability to legal persons such as companies or partnerships. Not only are those who profit directly from the act of money laundering punished, but the people aiding or facilitating are now equally guilty. This means that businesses will be held accountable for any illegal activity that takes place within their organization.
Businesses, therefore, need to revise their internal governance mechanisms to avoid any possible legal repercussions. Particularly pay close attention to persons having authority to make decisions on behalf of, or exercise control over, a particular legal person. In addition, businesses must have systems that can identify and mitigate any risks associated with money laundering and terrorist financing. Revised internal governance mechanisms will help companies comply with the 6AMLD and avoid any negative consequences.
Europe is working together to combat terrorism and organized crime. The new 6AMLD will strengthen cooperation between Member States by introducing investigative tools that allow them to share jurisdiction when criminal activities cross more than one country's borders based on factors such as where it was committed or the origin of its victims.
6AMLD has introduced stricter penalties for individuals and businesses caught following its requirements. From four years prison time, plus other “proportional measures” that include fines or closure of business units, and even at the end, European authorities reserve the right to shut down entire companies!
The passage clearly outlines how the 6AMLD will affect businesses by having fewer excuses if they are found to have enabled money laundering. Boldface characters: With such high stakes, it is not just about using what you already have well but considering alternatives like agile workflows, RegTech tools, and decentralized identities that may help achieve compliance or risk management while still providing adequate protection.
Although organizations should be aware of this legislative framework's extended liabilities and measures, complying also brings new opportunities. Considering the risk of being non-compliant, this also raises the bar for your company. By embedding this framework, your company can get ahead of future developments.
The financial regulatory landscape is changing so quickly that it's hard to keep up. In just a few years, we've seen both 5AMLD and 6 AMLD come into effect. How long will it take until the 7th increases money laundering strictness in Europe? This presents challenges and opportunities as firms must stay agile if they want their business practices to comply with these new regulations.
Fintech companies are under increasing scrutiny from consumers, who have a higher level of due diligence to ensure they only work with reputable service providers. However, if your firm falls short in its compliance requirements and is caught by penalties as a result - don't forget the damage done to building up a reputation over time, which may lead you nowhere fast when it comes down to just one wrong decision at this point!
RegTech tools, platforms, and other solutions help firms improve their AML efforts by providing stakeholders with faster, more accurate, cost-efficient compliance with KYC processes. These RegTech platforms can also offer fintech companies the opportunity to implement thorough anti-money laundering programs. As a result, these technology-driven projects are more likely to change how we do business today than ever.
Decentralized identity is an emerging technology that offers a new way to manage digital identities. Unlike traditional centralized identity management systems, DI allows individuals and organizations to control their data. This gives users greater control over who can access their data and how it is used. Decentralized identity also has the potential to improve the efficiency of identity verification, as data is stored on a decentralized network rather than in a centralized database. This makes it more difficult for criminals to exploit weaknesses in the system.
The European Union's Sixth Anti-Money Laundering Directive (6AMLD) recognizes the potential of DIs to help combat financial crime. And while the Directive requires member states to put in place measures to prevent the use of anonymous money resources and virtual currencies for money laundering and terrorist financing purposes, decentralized identities provide transparency in transactions and the opportunity to detect suspicious activity.
Using blockchain technology, these ID systems can provide a secure way for businesses to verify customer identities without storing sensitive information centrally, ensure compliance, and take adequate measures to prevent money laundering and terrorist financing. Furthermore, decentralized identities also help businesses to reduce the costs associated with identity verification. As they no longer need to maintain separate databases or hire third-party providers.
Early December 2022, the Commission of the European Union will submit a report on national implementations of this new legislation and its impact across Europe. Furthermore, it will elaborate on what needs improvement. And next year, we can expect another assessment of the effects of 6AMLD on crime fighting and business developments.
The content of these reports will significantly impact the future regulatory activity surrounding AML. Following what we have seen in 6AMLD and actions already taken, it is likely that Europe will broaden its scope to include money laundering offenses, among others: liability for predicate crimes increased even more than before! The European Union is positioning itself to create a centralized authority.
Decentralized identities offer many benefits for businesses, including increased security, privacy, and control. 6AMLD is an important step forward in developing decentralized identities, as it provides a clear framework for their use. Businesses should consider adopting decentralized identities to stay ahead of the curve and reap their benefits.
Truvity offers companies, developers, and identity experts complete decentralized digital identity management. We provide different solutions, such as
Truvity offers companies, developers, and identity experts the opportunity to fully discover and adopt the power of decentralized identities in their businesses and applications. Our cutting-edge, managed API platform converts the complexity of this new technology into a simple end-user platform.
At the core of Truvity lies a database solution designed in-house - a critical infrastructure component for the whole platform. This database allows us to offer SSI-based solutions that are not only simple and convenient for the end user but also highly secure and compliant with data protection regulations.
If you're looking for a 6AMLD or a potential 7AMLD-compliant solution, look no further than Truvity. Our platform will give you the tools to do business transparently and fairly by carefully collecting, using, and protecting data in a way that complies with current law.
Get in touch with us today to find out more.