It so happened that the publication this fall of the Pandora Archives coincided with the implementation of the 6th EU Anti-Money Laundering Directive and the publication of the EU normative concept AMLA. These events are fundamentally changing the picture of fintech regulation, raising the question of banks' revision of risk assessments associated with servicing crypto-exchanges and forex companies.
Now let's take a closer look at each of the three events aimed at money laundering fighting.
On October 3, 2021, the International Consortium of Investigative Journalists (ICIJ) published The Pandora Papers. The archive includes images, emails and other sensitive data from 14 financial companies from different countries, including Panama, Switzerland and the UAE. The archive is larger than the Panama Archives (2016), which contained 11.5 million confidential documents. At the time of publication of the documents, the ICIJ stated that they did not indicate the source of the documents. In total, over 100 billionaires, 29,000 offshore accounts, 30 current and former executives and 300 government employees were named in the first leaks on October 3, 2021. The leak not only revealed the role of law firms and offshore companies, but also showed again that illegal assets are usually transferred to certain jurisdictions, most often to the UK and the United States. In this regard, new calls were made for reforms in both countries.
The sixth European Directive on combating money laundering (Directive (EU) 2018/1673 on combatting money laundering by criminal law - 6AMLD) was adopted on November 12, 2018. This directive complements the Fifth Anti-Money Laundering Directive (5AMLD), which was adopted the same year. EU Member States were required to harmonize their national AML / CFT legislation in line with 6AMLD by the summer of 2021. AMLD6 seeks to close loopholes in anti-money laundering (AML) measures in EU member states by increasing liability for those found guilty of wrongdoing. The sixth EU Anti-Money Laundering Directive covers the issue of dual criminality by requiring Member States to recognize certain primary offenses, even if they do not violate the law in that jurisdiction.
A logical continuation of AMLD6 is a new package of legislative initiatives aimed at strengthening EU rules related to combating money laundering and terrorist financing. In the summer of 2021, the European Commission presented a bill to create the Anti-Money Laundering Authority (AMLA), which is to begin work in 2024. From 2026, AMLA will be able to control cross-border financial companies and fine firms that violate anti-money laundering rules.
The consequences of Pandora's archive are still difficult to assess, however, it is clear that banks are now in a difficult situation: the introduction of 6 AMLD in all EU countries coincided with the announcement of AMLA and a new regulatory drama around financial risks. Financial scrutiny by regulators will only increase, so we recommend that organizations respond early to these changes with real action, such as retraining their compliance staff and redefining their current KYC and KYB processes.
