By PJ Rohall
With Europe’s 6th anti-money laundering directive (6AMLD) in effect, its countries have tightened and synchronized their security like never before. Should the US follow in the same footsteps?
Let’s explore why measures like 6AMLD are important today, as well as how the US compares in combating money laundering. There is room for improvement, if only to counter the fast evolution of cybercrime.
This is where the EU’s directive comes in as a source of inspiration. US legislation could draw from anti-money laundering principles and processes that work and adapt them to its own needs.
What Is 6AMLD and Why Does It Matter?
Europe’s anti-money laundering directive first came to be in 1990 and has evolved since then to prevent and tackle crimes related to money laundering and the financing of terrorism. 6AMLD is just the latest version of the directive.
For instance, on top of 5AMLD regulations, such as limiting anonymous transactions and optimizing Know Your Customer (KYC) processes, the 6th directive added cybercrime, environmental crime, aiding and abetting, and other acts to its predicate offenses list for money laundering, now amounting to 22.
But the update doesn’t just aim to strengthen EU anti-money laundering, but also to make it easier for member states to understand and comply with the rules. Besides better channels of communication for international bodies, the European Commission even provides a trainers’ manual for lawyers.
By pinpointing all possible threats and constantly ironing out kinks in regulations and resources accordingly, European countries can harmonize their efforts to combat financial crimes, whether by sharing information or setting universal standards, for example, in transaction monitoring.
Related tools are essential in AML processes as they ensure a company, whether it’s a bank, retailer, or iGaming platform, pays close attention to financial exchanges and blocks those that fail its risk checks. Through careful authentication, tracking, encryption, and more, you can prevent payment fraud.
As EU businesses use such methods to boost their ability to catch suspicious activities, like large cash deposits from or to unknown parties, their relations with customers and partners improve, while AML fines and review costs go down.
What Are the Differences Between EU and US AML Legislation?
Both the US and European Commission are Financial Action Task Force (FATF) members, a global organization tackling money laundering and terrorist funding, which expects its countries to comply with set regulations, such as using KYC, due diligence, monitoring, and penalizing procedures.
However, this doesn’t mean that all members have the exact same framework for following these rules. When it comes to the US, there are plenty of laws combatting financial crime, its key legislations being the Bank Secrecy Act (BSA), Patriot Act, and Anti-Money Laundering Act (AMLA).
They focus a lot on enforcing AML procedures like customer due diligence, record keeping, information sharing, training, and penalties for violators. The whole system has been upgraded over the years to face terrorism, shell companies, and digital threats.
The biggest difference from EU AML legislation is that the US mainly sees businesses like banks, brokers, and casinos as financial institutions. The Anti-Drug Abuse Act of 1988 did add car dealerships, real estate agencies, and other companies that handle cash transactions to the list, but it’s still not nearly as broad as it could be.
By comparison, 6AMLD’s rules clearly recognize that money laundering schemes don’t always appear in obvious places. Considering the range of financial bodies available today, this is an important oversight on the US’s part.
Based on eCommerce statistics, this sector in the US is expected to reach $560 billion in revenue by 2025, not a surprise considering 2021 saw over 2 billion online shoppers. Different digital resources factor into this, but payment options especially as 90% of US buyers used PayPal in 2021 and Q2 ushered in a 57% increase in payments for Venmo, one of many digital wallets growing in popularity.
Another way in which the US and EU differ is that the latter puts more emphasis on harmonizing the processes of its member states, whereas some parts and businesses of the US aren’t policed as readily.
That said, it’s difficult for both territories to stay on top of everything, which is why making anti-money laundering measures very accessible as well as efficient is important. It enables individual countries to monitor their own businesses and cooperate smoothly with AML regulators.
Is 6AMLD Showing the Way Forward for the US?
The US and EU appear to have the same AML foundation but different focal points. For example, they both understand the need to verify and monitor transactions, as well as educate and collaborate with people, since trusting AI to fight money laundering isn’t always an option.
But, unlike the EU’s wider net, the US limits the financial institutions it polices and looks for specific problems like shell companies. So, while US anti-money laundering legislation is at a good level, it can learn much from 6AMLD in terms of how to upgrade and unify its services and ultimately counter financial crimes faster and more effectively.
About the Author
PJ Rohall – Boasting more than a decade of experience in the fraud prevention landscape, PJ Rohall is the Head of Fraud Strategy & Education at SEON Fraud Fighters. You may also know him from his work at About-Fraud, the Global Community for Fraud Fighters he co-founded, or one of his countless and memorable speaking engagements. Ever-learning and ever-teaching, PJ is an endless source of information, trends and insight into fraudsters’ minds and techniques. He understands that knowledge is power and wields it with a passion that is contagious.