Money laundering is a serious crime that undermines the integrity of financial systems and enables other criminal activities to thrive. To combat this problem, the European Union has implemented the 6th Anti-Money Laundering Directive (6AMLD), which identifies 22 predicate offenses that can be associated with money laundering. A predicate offense is a criminal activity that generates proceeds that can be laundered.
What is 6AMLD?
The 6th Anti-Money Laundering Directive (6AMLD) is a legal framework implemented by the European Union to combat money laundering and terrorist financing. It was adopted in October 2018 and became effective on December 3, 2020. The directive updates and strengthens the previous AML directives and introduces new provisions to enhance the EU's efforts to prevent money laundering and terrorist financing.
Some of the key features of 6AMLD include a broader definition of money laundering, stricter penalties for offenders, mandatory central registers for beneficial ownership, increased cooperation between authorities, and the identification of 22 predicate offenses that can be associated with money laundering. The directive applies to a wide range of entities, including financial institutions, virtual asset service providers, tax advisors, and auditors.
What are the 6AMLD 22 Predicate Offenses?
The 22 predicate offenses are a list of criminal activities that can generate proceeds that may be used in money laundering. These predicate offenses were identified in the 6th Anti-Money Laundering Directive (6AMLD), and they are as follows:
- Terrorism
- Drug trafficking
- Arms trafficking
- Organized crime
- Kidnapping
- Extortion
- Counterfeiting currency
- Counterfeiting and piracy of products
- Environmental crimes
- Tax crimes
- Fraud
- Corruption
- Insider trading and market manipulation
- Bribery
- Cybercrime
- Copyright infringement
- Theft and robbery
- Human trafficking and migrant smuggling
- Sexual exploitation, including of children
- Illicit trafficking in cultural goods, including antiquities and works of art
- Illicit trafficking in hormonal substances and other growth promoters
- Illicit arms trafficking
These predicate offenses were identified to help financial institutions and authorities to detect, prevent and investigate cases of money laundering more effectively. The list is not exhaustive, and EU Member States may also identify other criminal activities as predicate offenses.
How are Predicate Offenses Related to Money Laundering?
Predicate offenses are related to money laundering because they provide the illegal proceeds that are laundered through financial systems to hide their origin and make them appear legitimate. Criminals engage in predicate offenses to generate income from illegal activities, and then they use various techniques to conceal the origin of the funds and make them appear as if they were generated from legal sources.
Money laundering is a process that involves three stages: placement, layering, and integration. During the placement stage, the proceeds of the predicate offense are introduced into the financial system. During the layering stage, the funds are moved, and transactions are conducted to make it difficult to trace the origin of the funds. Finally, during the integration stage, the laundered funds are reintroduced into the economy as if they were legitimate.
Identifying and preventing predicate offenses is crucial in the fight against money laundering because it disrupts the flow of illegal funds and makes it harder for criminals to hide their activities. By identifying predicate offenses, financial institutions, and authorities can focus their efforts on detecting and preventing money laundering activities associated with these criminal activities. This is why the 6AMLD introduced the list of 22 predicate offenses, which serves as a basis for identifying and investigating money laundering activities across the European Union. In practice, this starts with knowing who you are dealing with. You can screen any name against global sanctions and PEP lists with our free Sanction Check and free PEP Check.
What is the Future of 6AMLD and Its Role in the Fight Against Money Laundering?
The 6AMLD represents a significant step forward in the fight against money laundering and terrorist financing. The directive provides a more comprehensive legal framework for preventing and detecting money laundering and terrorist financing across the European Union.
In addition to the identification of the 22 predicate offenses, 6AMLD also includes several other key provisions, such as mandatory central registers for beneficial ownership, increased cooperation between authorities, and stricter penalties for offenders. However, the fight against money laundering is an ongoing process, and there is still much work to be done. Criminals continue to find new ways to launder their illegal funds, and the regulatory environment is constantly evolving.
Therefore, it is likely that 6AMLD will continue to be updated and refined to address new challenges and emerging risks. The European Union has already begun work on the 7th Anti-Money Laundering Directive (7AMLD), which is expected to further strengthen the legal framework for preventing and detecting money laundering and terrorist financing.
FAQ's Blog Post
Yes. Tax crimes are one of the 22 predicate offenses named in 6AMLD, along with fraud, corruption, cybercrime, and the rest. That means proceeds from tax evasion can be treated as the source of laundered funds and can set off an AML investigation.
The predicate offense supplies the money; laundering cleans it. Criminals run the illegal activity to make a profit, then push those funds through the financial system so they look legitimate. By defining which crimes count as predicate offenses, 6AMLD gives banks and authorities a clearer target when they try to spot and investigate laundering linked to those activities.
6AMLD names 22 categories of crime that can produce launderable proceeds: terrorism, drug trafficking, arms trafficking, organized crime, kidnapping, extortion, counterfeiting currency, counterfeiting and piracy of products, environmental crimes, tax crimes, fraud, corruption, insider trading and market manipulation, bribery, cybercrime, copyright infringement, theft and robbery, human trafficking and migrant smuggling, sexual exploitation (including of children), illicit trafficking in cultural goods, illicit trafficking in hormonal substances, and illicit arms trafficking. The list isn't final, and individual member states can add offenses of their own.
A predicate offense is the underlying crime that produces the dirty money in the first place. Something like drug trafficking, fraud, or corruption generates illegal proceeds, and money laundering is the separate step of hiding where those proceeds came from. Without a predicate offense there's nothing to launder, which is why AML rules treat the two as tied together.
