The German Federal Government has prepared the Draft Law for the Effective Trial of Money Laundering to implement the EU's Sixth Anti-Money Laundering Directive (6AMLD) as of October 14, 2020. The primary purpose of the 6AMLD is to improve compliance of criminal obligations applied under the EU-27 to prevent money laundering and terrorist financing. 6AMLD implementations included in the German anti-money laundering legislation dealt with regulations such as the obligations to audit KYC processes and report suspicious transactions. In contrast, the current practices it includes are slightly different from the previous rules in German anti-money laundering legislation.
What is 6AMLD?
Organizations within the European Union have been required to comply with AML regulations since 1990 when the first AML Directive was implemented. These regulations include performing customer due diligence, such as verifying customer identity and reporting suspicious transactions. The European Union continuously revises and updates its AML Directives to mitigate the risk of money laundering and adhere to current AML regulations. The primary goal of European Union regulators is to safeguard customers and businesses from money laundering and terrorist financing.
The 6AMLD was recently enacted on December 3, 2020, and financial institutions are required to adhere to it until June 3, 2021. 6AMLD was developed under the guidance of 5AMLD to significantly strengthen existing AML/CTF requirements. 6AMLD aims to broaden the scope of AML practices within existing legislation, as well as reinforce and clarify criminal sanctions.
As a European Union regulation, 6AMLD imposes more stringent obligations than the previous 5AML Directives.
Proceed Germany's Transition to 6AMLD: Why Effective Implementation Matters
The Draft Law designed to apply the EU's 6AMLD regime to German Law has been developed to bring about a "paradigm shift" in the prosecution of money laundering in Germany. By proposing that revenues from any criminal activity should also be detected under the crime of money laundering, the new law aims to detect multiple money laundering activities and make deterrence more effective.
Although financial services firms such as insurance providers are not the main focus of 6AMLD or the Bill of Law, the German Anti-Money Laundering Draft Act will implement the requirements of the EU's current money laundering regime 5AMLD. While the EU is not recommending any changes to the Law, the German Penal Code defines the money laundering sanction under the German Anti-Money Laundering Act. Therefore, financial institutions must review their AML processes and documents to ensure compliance with the proposed changes outlined in the new Draft Law.
Effective implementation of the new law is crucial for combating money laundering in Germany. Financial institutions must take the necessary steps to ensure they are up-to-date with the latest AML requirements and have the necessary processes and documentation in place to comply with the new legislation. Failure to comply could lead to severe consequences for both the financial institutions and their customers.
The Impacts of 6AMLD on Regulated Institutions in Germany
The impact of 6AMLD on regulated institutions in Germany is not limited to changes in processes and procedures. The new Draft Law has brought significant changes to the regulatory framework that financial institutions need to be aware of.
One of the most notable changes is that institutions are no longer required to identify a specific precursor crime. However, they must still report any suspicious transactions before criminal sanctions can be imposed. This change has been deemed not to have a significant impact on current reporting practices and KYC controls by the German Federal Government, according to their statements in the Draft Law's annex.
Moreover, the new criminal framework targeting mandatory organizations listed in the GwG has been introduced. The criminal sanction against any money laundering offense committed by such entities is at least three months, while the general penalty imposed within the scope of money laundering has been set at a minimum of 5 years. Therefore, the German regime has complied with the Draft Law's 6AMLD obligations, which address the shortcomings in the existing GwG.
The Draft Law proposes several new regulations aimed at strengthening the prevention of money laundering in Germany. These regulations include measures to better detect and track earnings from criminal activities, expanded investigative powers for prosecutors, and the allocation of money laundering cases to criminal court units.
One of the most significant changes is the proposal to allow prosecutors to determine whether earnings are derived from criminal activities, which will enable more effective prosecution of money laundering cases. The Draft Law also seeks to provide prosecutors with greater access to communication tools, such as telephones, to aid in their investigations.
In addition, the allocation of money laundering cases to criminal court units is expected to improve the handling of these cases and ensure that they receive the necessary attention and resources. Overall, these new regulations represent a significant step forward in the fight against money laundering in Germany.
How Should Germany Prepare for 6AMLD?
German businesses must prepare for the 6AMLD by updating their technological setups and adapting to the new regulations. The Draft Law, aimed at applying the EU's 6AMLD regime to German law, seeks to make law enforcement more effective in fighting organized and severe financial crime. According to German Federal Justice Minister Christine Lambrecht, the new law will make it easier to detect money laundering cases in the future than it is now. Therefore, the law aims to regulate money laundering crimes more clearly and broaden criminal obligations.
While businesses are already obliged to comply with AML/CTF regulations, 6AMLD aims to impose stronger criminal sanctions against any money laundering and terrorist financing crimes. This means that businesses must be able to act faster against risks and threats. The German government has already shown its compliance with the 6AMLD Directive in the Draft Law, and it is now the task of German businesses to take the necessary steps to protect themselves from money laundering risks by updating their technological setups and complying with the new regulations.
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Sanction Scanner's solutions can help companies in Germany in several ways. Firstly, their AML screening solutions can help companies to screen their customers and suppliers against various global sanction lists, politically exposed persons (PEPs) lists, and other high-risk entities and individuals. This helps companies to identify and avoid doing business with individuals and entities that are associated with money laundering, terrorist financing, or other financial crimes.
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Sanction Scanner's AML compliance solutions can help companies in Germany to automate their AML compliance processes and reduce the cost and time associated with manual AML checks. This can help companies to improve their operational efficiency and enhance their overall compliance posture.
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