December 2, 2020

Sixth anti-money laundering directive - tougher penalties for acquiring money of non-verified origin

The transposition of the Sixth Directive, which provides for extremely serious penalties for breaches of anti-money laundering legislation, is now on the agenda again.

This 2020 is passing marked by the pandemic, but also by the ongoing hysteria around the obligations to implement anti-money laundering measures. Obliged entities have barely taken a breather after yet another wave of requirements to bring their internal documents and processes in line with the law in August and September 2020.

The Sixth Directive on combating money laundering and terrorist financing (“the Directive”) shall be transposed by Member States by December 3, 2020. It was adopted in 2018 in addition to the preceding Fifth Directive 2018/843 on the prevention of use of the financial system for the purposes of money laundering and terrorist financing.

The Directive does not provide for any additional obligations for the measures’ implementation by obliged entities, but it does impose the obligation on Member States to use the full severity of the law on offenders.

The act provides for criminal liability for persons who commit acts constituting money laundering - concealment of the origin of property acquired through criminal activity, its transfer, acquisition, possession, and other acts. Not only is the intentional acquisition or disposal of such property punishable, but also such where the person suspected or should have known that the property had a criminal origin. So far, there are no significant differences with the composition provided for in the Bulgarian Penal Code in 2006.

An intriguing supplement to the Directive is that if the perpetrator is a person obliged to apply anti-money laundering measures who acted in the course of their professional activity – this will be considered as an aggravating circumstance.

The most fundamental innovation introduced by the Directive is the possibility for legal persons to be held criminally liable for offences in the field of combating money laundering. For some Member States this is not a precedent - legal entities are criminally liable in many countries (e.g. Austria, Belgium, Denmark, France, etc.). However, such a legal doctrine is not only unknown to the Bulgarian legal system, but it is also in direct contradiction with one of the fundamental principles of our criminal law - only natural persons are criminally liable.

It should be noted that the above is only an option, with Member States being free to decide whether legal persons should be sanctioned in terms of criminal law or administrative liability. The Directive also proposes exemplary sanctions to be imposed on legal entities - deprivation of the right to engage in commercial activities, to participate in public procurement, to receive state aid, placement under judicial supervision, forced closure of sites or even forced winding up of the legal entity. As expected, confiscation of the “laundered” funds or the property acquired through them is also envisaged.

Whatever approach the Bulgarian legislator takes, it should adhere to the main objective of the Directive – “to provide for effective, proportionate and dissuasive criminal penalties for money laundering in all Member States”. This is to be achieved through a blend of a clear, accurate and comprehensive description of the rights and obligations of obliged entities, the provision of proportionate and adequate penalties, and of course - stringent control over the implementation of the law.

Some steps toward achieving these goals are also perceptible in the new legislative initiative of the Bulgarian authorities. A bill amending the Measures Against Money Laundering Act  (MAMLA) has been recently published for public discussion, providing for the abolition of a legal obligation for a number of entities, which currently have to apply measures against money laundering. The legislator probably came to the conclusion that the effective enforcement of the measures does not mean a universal administrative burden for most of the businesses, but a concentration of the necessary resources in the sectors where the risk of money laundering is actually higher.

Whether this will happen and to what extent the aim of all existing directives will be achieved is yet to be seen. It is possible that the process will be accelerated if the idea of pan-European anti-money laundering legislation becomes reality. At EU level, even the idea of a common regulatory body to monitor compliance in all Member States is being discussed.

No matter what, how and when will happen at legislative level in the future, it is already clear that the regulation in the field of anti-money laundering measures will become even stricter. This will create the need for increased attention and diligence on part of obliged entities in fulfilling their obligations to recognize and prevent money laundering.

Tsvetelina Koleva
Senior Associate

Having practiced for ten years in the core of DPC dispute resolution team, Tsvetelina has made herself a name as a dedicated and tenacious litigator who is not afraid of tough cases.

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