The EU Directive on combating money laundering by criminal law (Directive 2018/1673) aims to deter money laundering by establishing harsher sanctions for criminals and punishing those aiding and abetting them. Not to mention, it also contributes to closing loopholes due to discrepancies between the EU countries’ national laws by introducing:

  • an EU-wide definition of what constitutes a money laundering offence
  • increased cooperation between EU countries

EU’s Directive 2018/1673 does not repeal or replace existing AML Directives. Instead, it complements them.

 

How does the EU Directive on combating money laundering by criminal law supplement existing AML Directives?

The EU Directive on combating money laundering by criminal law supplements existing AML Directives by introducing the following:

1. EU-wide definition of money laundering offences

EU’s Directive 2018/1673 defines 22 predicate offences for money laundering, thus ensuring that the same money laundering offences are punishable across all EU states.

The list includes traditional crimes such as human trafficking, migrant smuggling, and drug trafficking, as well as emerging threats such as cybercrime and environmental crimes.

2. Criminal sanctions for aiding and abetting money laundering

Under Directive 2018/1673, encouraging or helping a person to commit money laundering is punishable as a criminal offence.

Consequently, accomplices now face criminal penalties for intentionally assisting or encouraging criminals to commit money laundering.

3. Corporate criminal liability

The EU Directive on combating money laundering by criminal law extends criminal liability to legal persons.

Accordingly, if a company fails to prevent money laundering due to a lack of supervision or control, both the company and its senior management will be held liable.

Punishments range from temporary bans on operations and placement under judicial supervision to the permanent closure of the business.

4. Harsher penalties

The Directive increases the maximum prison sentence for money laundering from one to four years. However, EU countries are encouraged to take additional sanctions or measures, where necessary.

Additional sanctions may include but are not limited to fines, exclusion from claiming public funds, disqualification from practising commercial activities, bans on running for public office, and winding-up orders made against the company.

5. Increased cooperation between EU countries

The Directive also sets out cooperation requirements between member states to ensure the efficient prosecution of criminals who committed the crime in one country but laundered the proceedings in another.

The two countries will have to share information, assist each other, and determine which of them should prosecute based on:

  • the country in which the criminal committed the offence
  • the nationality of the criminal
  • the home country of the victims
  • the country in which the criminal was found

 

National transposition

The EU Directive on combating money laundering by criminal law has been transposed into national law by all EU states, except Denmark, Ireland, and the UK.

 

Conclusion

The EU Directive on combating money laundering by criminal law complements the existing EU AML Directives and strengthens the EU AML/CFT framework. The Directive contains provisions that aim at improving cross-border cooperation between competent authorities by establishing common definitions, sanctions, and requirements across EU member states.

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