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 the 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?
The European Union complied with the first Anti-Money Laundering Directive in 1990. Under this obligation, organizations must comply with customer due diligence requirements, such as verifying customer identity or reporting suspicious transactions. The European Union AML Directives are constantly revised to prevent money laundering risk and updated according to the current AML regulations. European Union regulators' main objective is to protect customers and businesses from money laundering and terrorist financing activities.
The Sixth Anti-Money Laundering Directive (6AMLD), which entered into force on December 3, 2020, will be valid by financial institutions until June 3, 2021. 6AMLD was created under the leadership of 5AMLD to strengthen existing AML / CTF obligations significantly. 6AMLD aims to expand AML practices of existing legislation, reinforce and clarify criminal sanctions.
In this context, 6AMLD, a European Union regulation, contains more stringent obligations than 5AML Directives.
How is Proceed Germany's Transition to 6AMLD?
The Draft Law, prepared for applying the EU's 6AMLD regime to German Law, aims to achieve a "paradigm shift" in the prosecution of money laundering in Germany. More specifically, the crime of money laundering proposed under German Law will also detect any criminal activity revenues. This paradigm shift has an essential role in detecting multiple money laundering activities and making deterrence more effective.
Financial services firms such as insurance provider organizations are not the main focus of 6AMLD or the Bill of Law. However, the German Anti-Money Laundering Draft Act implements the requirements of the EU's current money laundering regime 5AMLD. Therefore, the EU is not recommending any changes to the Law. However, according to the German Penal Code, the German Anti-Money Laundering Act's money laundering sanction is defined. For this reason, financial institutions need to review AML processes and documents to comply with the changes proposed by the new Draft Law.
Consequently, financial institutions need to review AML processes and documents to comply with the new Draft Law's proposed changes.
The Impacts of 6AMLD on Regulated Institutions in Germany
The Draft Law did not seriously affect the regulatory burden of institutions. However, processes and procedures have changed depending on the Law.
According to the German Federal Government's statements in the Draft Law's annex, the responsible bodies do not have to identify a specific precursor crime. However, suspicious transactions must be reported before any criminal sanctions are imposed. Thus, according to the German Federal Government, the precursor offense changes do not have an impressive structure to current reporting practices and KYC controls.
Besides, the crime of money laundering complied with by the German regime includes a criminal framework specifically targeting persons listed as "mandatory organizations" in the GwG. According to GwG, the criminal sanction against any money laundering offense is at least three months. In comparison, the general penalty imposed within the scope of money laundering has been designated a minimum of 5 years. Therefore, the German regime complied with the Draft Law, which contains 6AMLD obligations resulting from shortcomings in the GwG.
What are New Regulations in the Draft Law?
Through the Draft Law, the prevention of money laundering has been getting more comfortable in Germany. The principal regulations included in the Law are as follows:
- Determine, or even prove, whether prosecutors' earnings include criminal activities.
- To expand prosecutors' investigative powers by providing greater access to communication instruments, such as the telephone, in a money-laundering investigation.
- Allocating money laundering cases to criminal court units.
How Should Germany Prepare for 6AMLD?
German Federal Justice Minister Christine Lambrecht argues that law enforcement should be made more effective in fighting organized and severe financial crime. It will be easier to detect a money laundering case in the future than it is now. Therefore, it is necessary to regulate money laundering crimes more clearly and to broaden criminal obligations.
Businesses are obliged to comply with AML / CTF regulations. Companies that do not comply with the regulations are subject to certain penal sanctions. However, 6AMLD aims to make stronger criminal sanctions against any money laundering and terrorist financing crimes. Businesses must be able to act faster against risks and threats. The German Government has proved that it has complied with the 6AML Directive in the Draft Law. The task for German businesses is to have an updated, technological setup. In this way, they will protect their companies from money laundering risks by adapting to the new regulations.
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