The present Directive serves as a preventive tool against money laundering through Criminal Law. Supported by the subsidiarity principle as outlined in Article 5 of the Treaty on European Union, it aims to subject the crime of money laundering in Member States to effective criminal sanctions, while also standardizing the concepts related to this crime and judicial cooperation mechanisms.
The Directive 2018/1673 aims to establish a minimum definitional framework for money laundering crimes and sanctions. It sets out criteria in criminal law regarding the definition of money laundering offenses, complicity, penalties applicable to legal entities, and corporate liability, among other aspects.
Definition of the crime of money laundering in the Directive
To provide a clear definition of money laundering crimes, the Directive states that these offenses include:
- “the conversion or transfer of property, knowing that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property”;
- “the concealment or disguise of the true nature, source, location, disposition, movement, rights concerning or ownership of property,” knowing that it comes from criminal activity;
- “the acquisition, possession, or use of property, knowing at the time of receipt that it is derived from a criminal activity.”
Finally, the Directive notes that Member States may adopt legislative measures to ensure that these actions “are punishable as an offense when the offender suspected or ought to have known that the property was derived from criminal activity.”
So, what does the Directive mean by “criminal activity”? The European Union defines criminal activity as “any kind of criminal participation in the commission of any offense which, according to national law, is punishable by deprivation of liberty or a detention order for a maximum of more than one year.” The rule also includes a list of offenses that are always considered criminal activity, such as:
- Participation in a criminal organization;
- Terrorism;
- Human trafficking and smuggling of migrants;
- Sexual exploitation;
- Illicit trafficking in arms, stolen goods, and other items;
- Corruption;
- Fraud, counterfeiting currency, and product piracy;
- Tax offenses;
- Cybercrime.
Concrete measures to be taken by Member States
To achieve the goals of preventing money laundering through Criminal Law, the Directive mandates that Member States implement necessary measures. It specifies that Member States must remove the requirement of a prior conviction for the underlying criminal activity to prosecute the offenses listed in the Directive.
This means that to ensure the effectiveness of the measures in the Directive, it should be possible to convict for money laundering without a prior conviction for the criminal activity that generated the illicit funds.
Corporate criminal liability
Another key provision in the Directive is the inclusion of a liability and sanction regime applicable to legal entities. It stipulates that measures must be adopted to hold legal persons criminally liable for money laundering offenses.
In terms of penalties for legal entities, the Directive notes that sanctions may include:
- Disqualification from receiving public aid, as well as exclusion from access to public financing, bidding, concessions, etc.;
- Temporary or permanent disqualification from conducting business activities;
- Temporary or permanent closure of establishments used to commit the offense.
The deadline for transposing the Directive and achieving the results outlined within it is December 3, 2020. Additionally, on December 3, 2022, two years after the transposition, the European Commission will assess the measures adopted by Member States.
Conclusion
Money laundering, along with organized crime and terrorism, poses a significant challenge for the European Union. These activities threaten the European internal market and the integrity of the financial sector. This is why the EU has, over the years, established various Directives aimed at creating a common, uniform, and robust anti-money laundering policy among Member States.
With this Directive, the EU seeks to combat money laundering from a new perspective: Criminal Law. This Directive enables more efficient and rapid cross-border cooperation between the competent authorities and harmonizes the crime of money laundering among EU Member States.
It has been mistakenly referred to as the “Sixth Directive” in some cases. However, given the legislative proposals presented by the Commission in July 2020, it is more accurate to refer to the new Directive, currently in the approval process, as the “Sixth Directive.