Money laundering and terrorist financing techniques evolved extensively in recent years. Modern technology has given birth to innovative payment solutions and greatly facilitated the international flow of funds. In parallel, unfortunately, it has inspired the creation of increasingly sophisticated modern-day criminal techniques used to continuously seek to exploit new vulnerabilities. Indeed, while traditional money laundering techniques will continue to represent a threat to the financial system for years to come, the global shift towards a digital economy creates new opportunities for the execution of illicit transactions.
This scenario of heightened risks, together with the exposure of various high-profile money laundering and terrorism financing cases has given rise to an unprecedented scrutiny by both international and local regulators.
Over the years, anti-money laundering legislation has been consistently renewed to address emerging risks. Since 2015, we have had yet another string of legislative and regulatory amendments. The adoption of the Fourth EU Anti-Money Laundering Directive (4AMLD) across all EU Member States in 2017 resulted in a major shift towards a risk-based approach to money laundering prevention and deterrence. This critical milestone is by no means the end of this legislative journey as further change continues to be in progress.
The European Union has already approved two new directives, the Fifth and Sixth Anti-Money Laundering Directives, both of which are to be transposed into national legislation in 2020. These directives seek to promote greater transparency, strengthen the fight against terrorist financing and address national differences in the definition, scope and sanctioning of money laundering offences. More specifically, measures to be introduced by these new directives include greater access to beneficial ownership registries, lower thresholds for customer due diligence on electronic money products, extension of the subject persons definition to include virtual currencies providers as well as a harmonised list of 22 predicate offences.
Over the years, anti-money laundering legislation has been consistently renewed to address emerging risks
In view of increased cross-border criminal activity, these directives will also introduce several new measures aimed at improving co-operation between financial supervisory authorities within the EU.
What is the role of subject persons in this dynamic legislative and regulatory environment? They are widely considered as gatekeepers of the economy and obliged to prevent and deter the use of financial instruments for criminal purposes.
As a result, anti-money laundering has been and will remain at the top of the board’s agenda for the foreseeable future. Making the right investment in resources and technology is a key priority. In anticipation of the Fifth and Sixth Anti-Money Laundering directives’ transposition into local legislation, subject persons need to proactively consider the impact of these directives on their operational and compliance programs to ensure a smooth transition.
For more information on this topic, join EY Malta’s CPE Accredited training event on Anti-Money Laundering Compliance: The NextWave, on September 30, from 1.45pm to 5.15pm at EY’s Connect Centre, Msida.
To confirm attendance send an e-mail to events@mt.ey.com. Admission fee for this session is €59, incl. VAT.
Julian Grima is a senior manager in EY’s Banking Advisory Services and has significant experience in assisting local and international clients on various Anti-Money Laundering (AML) and Know Your Customer review and remediation processes, investigations and other financial crime-related work.
Christopher Vella is a manager in EY’s Banking Advisory Services and has advised various Maltese and UK-based credit institutions on AML and Financial Crime Compliance. He has practical experience in leading Customer Due Diligence remediation exercises and has supported local and international organisations in AML process reviews.