‘Naivety in compliance’: why 6 AMLD could see some banks starting to sweat


Edward Vaughan, Head of Banking at TruNarrative, considers how, faced with the 6th Anti-Money Laundering Directive, some neobanks, challenger brands and technically challenged incumbents may be heading towards regulatory armageddon

Introducing several major changes, the 6th Anti-Money Laundering Directive (6 AMLD) is due to be implemented on 3rd December 2020. It’s a significant iteration, further clarifying what constitutes money laundering.

22 named predicate offences are deemed criminal activity, even leaving those found aiding and abetting with no wriggle room.

Companies, not just individuals, are also criminally liable, with punitive sanctions and fines available.

The minimum prison term for money laundering offences rises from one to four years. The 6 AML framework – rightly – is even more robust than its predecessor. But there’s a problem.

Firms are growing weary of the constant changes required to maintain compliance with the latest regulatory landscape.

Many regulated firms are playing catch-up, and, in many instances, have yet to action regulatory controls called for in previous legislation.

Seasoned operators undoubtedly have the right intellectual resource to understand the compliance required; but they lack the agility to respond due to tight governance structures and inflexible technology solutions.

Whilst they are building out policies and frameworks, they cannot evidence to the regulators and auditors how they are instigating their AMLD controls.

Desperate to make progress, they are turning to the eager line  of tier one consultancy firms who purport to drive AMLD change within organisations at eye watering seven figure sums.

Neobanks: ripe for neolaundering?

In certain market segments, I believe the problems run even deeper. One would have thought that the brands most able to deal with rapid regulatory change and transition would be the pure digital players: neobanks and challenger banks. But some recent FCA activity might infer otherwise.

As customer centric product-led start-ups, neobanks are typically funded by investment, and under pressure to drive customer acquisition at almost any cost.

This business model – building the value of the brand as rapidly as possible to garner investor momentum – has consequences.

It can create a void in risk and regulatory control that doesn’t offer resilience around money laundering directives.

Most neobank ventures take time to turn a profit. Any new AMLD regulations introduced demand an investment in technology, or new ways of working, or professional expertise.

In sharp contrast, the business is striving to minimise or eliminate any increase in compliance overhead.


Investment in both the technical capability and senior experience must not be one of the compromises sacrificed as part a ‘cost of acquisition model’. 

Head of Compliance roles, normally filled in mainstream institutions by professionals with at least a decade or more specialist experience is not the panacea, however equally a lack of ‘game-time’ in a senior compliance role can lead to the C-Suite exposing investors to unnecessary fines or even loss of their entire investment.

Neobank governance models are by nature immature; both from a process experience and technology capability perspective which can lead to systemic failings in short order and quicker than even their business models can respond to.

Let’s fast-track fraud

For instance, frictionless onboarding allowing customers to open a new account in minutes is great in concept.

But rapid, crudely executed automated compliance checks will compromise understanding of, and therefore quality of, customers. Is there a history or evidence of predicate offences? Crucially, does anyone really care?

It might be many years before the full impact of failing to risk-score customers properly and failing to understand all the vectors around AML indicators, becomes apparent – most likely once the business has already been sold.

The result is a toxic customer base and a permissive environment for financial crime and fraud.

A buyer thinks they are acquiring a great brand; but with it comes a hidden stash of money launderers.

Change may be afoot

We’ve already seen big name neobank brands in the headlines for non-compliance with certain financial crime regulations.

Whilst the agility they have currently remains too focused on front-end product rather than back end compliance skills and technology, I do believe they have the capacity to change.

The internet bank start-ups I speak to are seeing the writing on the wall if they fail to act.

Let’s all hope now there’s a will to address money-laundering regulations properly, brands will undertake the necessary investment to provide the way.

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