Following the MONEYVAL Assessment released in May 2016, a consultation has just closed in order for the Jersey Financial Crime Strategy Group to consider responses to legislative proposals for change. Against this domestic backdrop, the Council of the European Union has adopted a proposed Directive on combatting money laundering by criminal law on 11 October 2018 (AMLD6). The new proposal would introduce new criminal law provisions aiming to harmonise criminal offences relating to money laundering and the financing of terrorism across Europe. The proposals build on the aim to reinforce the Fourth Anti-Money Laundering Directive (EU) (2015/849) (and its amendments introduced by the Fifth Anti-Money Laundering Directive) which must be implemented in Europe by 10 January 2020.
While Jersey is committed to following the FATF Recommendations the developments in European are relevant to Jersey because of the close trading relationship between the Bailiwick and Europe. Adopting EU standards on financial crime can be important for market access to the EU and to ensure that the jurisdiction is not considered to be a “high risk third country” by the EU.
Background to Proposals
The pre-amble to AMLD6 states that national differences in the definition, scope and sanctioning of money laundering offences, results in co-operation between national police forces being substandard creates an enforcement gap. It is also suggested that criminals exploit these legislative discrepancies to launder criminal proceeds. The proposals aim to reduce the scope for such occurring.
Overview of Proposals
The proposals include that EU Member States incorporate the following elements into their criminal legislation:
1. Harmonised definitions of criminal offences
The proposal aims to harmonize definitions of criminal offences relating to money laundering (Art. 3), including aiding, abetting, inciting and attempting such offences (Art. 4). It aims to remove the so called “Spanish Bullfighter” issue with respect to certain offences whereby funds derived from bullfighting is illegal in the United Kingdom but legal in Spain causing issues as to whether prosecution for the proceeds of bullfighting is possible or indeed appropriate in different Member States.
2. Harmonised minimum penalties
It is proposed to ensure that penalties for natural persons are of a maximum term of imprisonment of at least 4 years, potentially combined with additional sanctions or measures (Art. 5) as a means of ensuring that penalties are a sufficient deterrent.
3. Harmonised sanctions
AMLD6 would ensure that the liability of legal persons, who may face criminal and non-criminal fines and sanctions has greater harmonisation (e.g., exclusion from public aid, placement under judicial supervision, and judicial winding-up) (Art. 7 and 8).
4. Virtual Currencies and geographical scope
AMLD6 aims to mitigate against risks and challenges posed by the use of virtual currencies. The committing of a cybercrime is a predicate offence which is not envisaged by the FATF Recommendations. AMLD6 also aims to enhance EU Member States’ cooperation by setting uniform provisions regarding investigative tools (Art. 11) and rules to determine which Member State has jurisdiction (Art.10) when an offence falls within the jurisdiction of more than one Member State.
Under the proposed Directive, legal entities implicated in certain money laundering offenses may be held liable and face “effective, proportionate and dissuasive sanctions” from EU Member States, including criminal and non-criminal fines.
As ever in a fast changing world, both financial and non-financial institutions should consider reinforcing their existing AML/CFT policies and procedures and internal controls to mitigate the risk of a criminal proceeding being initiated against them by competent authorities.
While these changes are some way off, they will be considered by the Jersey authorities in due course.
Adopting EU standards on financial crime can be important for market access to the EU and to ensure that the jurisdiction is not considered to be a “high risk third country” by the EU. First however, the Jersey government will consider its position in relation to the 4th and 5th anti-money laundering Directive of the European Union in due course