For risk and compliance professionals operating within the banking sector, it may seem almost inconceivable that further Anti-Money Laundering (AML) regulation is already appearing on the horizon. With many operators still bedding down new systems and processes to comply with the 5th EU Anti-Money Laundering Directive (5AMLD), additional rules to counter the growing global threat of money laundering were introduced by the European Parliament towards the end of 2018. The 6th EU Anti-Money Laundering Directive (6AMLD) is due to be transposed into national laws by December 2020, with member states required to implement the new regulations by 3 June 2021.
Gambling operators, however, are becoming accustomed to this rapidly evolving and increasingly complex regulatory environment, designed to clamp down on bad actors. Governments are continuing to search for ways to protect consumers, while at the same time combating new forms of crime that have emerged within an industry that is increasingly digitally-driven. Of particular concern is the relatively new phenomenon of gaming and gambling platforms being used as a means to launder money.
Defining new money laundering threats
6AMLD provides clarification and context around many of the new money laundering threats, which are emerging across the global economy, and notably within the gambling sector. If 5AMLD was about expanding the scope of businesses’ obligations in countering money laundering, 6AMLD goes deeper, providing a more detailed definition of these requirements. As is often the case, regulators cast the net wide in order to tackle issues, and are now refining these rules to make them more effective and practical.
The new regulation lists 22 predicate offences relating to money laundering, providing for clear definitions of each specific crime. Importantly, the last of these offences is cyber crime, which for the first time is included within AML regulation. This is significant because it enables organisations and regulators to root out money laundering crimes more easily and effectively across a wide range of online activities.
Importantly, 6AMLD will cover all regulated entities across the EU, plus any UK organisations that are operating within the EU after Brexit, whatever the outcome of current political negotiations. Brexit does not represent a way around 6AMLD; any UK operators wanting to operate within the EU need to comply with the new rules.
Rooting out bad actors
In addition to this, 6AMLD is noteworthy because it is very clear in its objective to pinpoint the individuals within an organisation who are responsible for money laundering crimes. The introduction of new offences such as ‘aiding and abetting’ and ‘attempting and inciting’ also extends criminal liability from those directly responsible for converting the proceeds of crime to accomplices in the laundering process. No longer can individuals hide behind a business entity; the regulation is designed to provide complete transparency around who owns and controls these entities. And of course the increase in punishments will grab the headlines, with minimum prison sentences increasing from one to five years.
Compliance as a catalyst for growth
While 6AMLD is very much consistent with the spirit of previous regulations, operators will need to review their AML monitoring processes and identify areas for improvement within their customer onboarding and operational models. In response, operators are likely to look to regulatory technology to automate more of their onboarding processes and access a wider and more robust pool of information on prospective customers.
However, while 6AMLD represents the next major deadline for risk and compliance professionals within gambling, it is in reality just another marker in a never-ending battle against money laundering. As new threats continue to emerge, the frequency and scope of new regulation will only increase.
Against this backdrop, operators should look to take a broader view of their compliance and operational best practices. So, rather than focusing solely on being compliant with 6AMLD come June 2021, operators should also look to instill a more flexible, adaptable approach to compliance. Establishing a governance framework which operates at a higher level than the current rules means that it is easily adaptable to future regulation.
Forward-thinking operators are now accepting that the traditional ‘do the bare minimum’ approach to compliance is simply not feasible in the digital economy. Instead they are approaching compliance, and in particular the adoption of RegTech, as a key strategic priority and differentiator within the market. By ensuring they have the flexibility to adapt to changing regulatory requirements easily and quickly, these operators ensure they can be first to market with new products and services, while at the same time minimising risk.
This article first appeared on EGR Global.
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