In-house or Outsourced – the million dollar question
March 13, 2018
QGEN is officially a National Winner
March 23, 2018

3rd AMLD & 4th AMLD compared and contrasted

The increase of regulatory scrutiny in relation to Anti-Money Laundering (AML) and the Counter Funding of Terrorism (CFT) has raised challenges to those industries subjected to such regulations.

The importance of implementing and maintaining a resilient compliance and anti-money laundering programme and an internal business risk assessment is a crucial aspect in determining the success of an operation.  Non-compliance may pose detrimental and irreparable damage to an organisation’s reputation; and this can in turn lead to very costly repair-work.

The 4th AMLD has delved deeper into administrative penalties when compared to its predecessor – the 3rd AMLD. Looking back at the 3rd AMLD – this directive included the importance of anti-money laundering and the counter funding of terrorism and thus contained instructions to EU member states to lay down “effective, proportionate and dissuasive penalties” and that sanctions pertaining to legal persons shall also be “adjusted” according to the activity carried out by that legal person.

When discussing the pertinent aspect of infringements within financial institutions, the 3rd AMLD, once again highlights the importance that the “measures or sanctions are effective, proportionate and dissuasive”.

Administrative Sanctions have taken a dynamic approach within the newly introduced 4th AMLD, as member states are to, as a minimum, apply sanctions to breaches being “serious, repeated, systematic”; or falling within any of the following criteria (within an entity’s compliance regime):

  • Customer due diligence (CDD)
  • Suspicious transaction reporting
  • Record keeping
  • Internal controls

The administered sanctions and measures to be taken into account and applied thereof, shall as a minimum include the following:

  • Public statement including the identification of the natural or legal person and the extent of the breach by them;
  • An order requiring the natural or legal person to cease the conduct and to desist from repetition of that conduct;
  • Where an obliged entity is subject to an authorisation, withdrawal or suspension of the authorisation;
  • Temporary ban against any person discharging managerial responsibilities in an obliged entity, or any other natural person, held responsible for the breach, from exercising managerial functions in obliged entities;
  • Maximum administrative pecuniary sanctions of at least twice the amount of the benefit derived from the breach where that benefit can be determined, or at least EUR 1,000,000.

The 4th AMLD also discusses instances where the involved body is a credit or a financial institution the maximum administrative sanction/s is of a minimum of EUR 5,000,000 or ten percent (10%) of total annual turnover according to the latest provided accounts. The 4th AMLD also takes into consideration those entities that act as a parent company or are a subsidiary thereof – in such case the total shall be the grand total annual turnover resulting from the latest available consolidated accounts. In cases of natural persons, the sanction shall also be of at least 5 million euro (or the equivalent value in the person’s national currency) as on the 25th June 2015.

Authorities may also enforce additional types of administrative sanction/s as deemed necessary.

QGEN advisory team can help you get your house in-order by auditing your procedures and practices and recommending the best practices for your compliance department.