Anti-money laundering directive in the defense payments sector: Is there need for a separate regulation?
Commentary: The EU has adopted a stricter regulatory framework for defense industry payments. It will only be a matter of time until similar frameworks are adopted elsewhere in the world, according to consultants Ella Rosenberg and Aviel Marciano from Armada
IsraelDefense
| 06/07/2021
Photo: Bigstock
By Ella Rosenberg and Aviel Marciano
Payments in the defense industry have become increasingly difficult to sustain, maintain and execute. The new anti-money laundering directive, 6 AMLD, has set a new limit on transactions, regardless of their source, and also set a new definition of the high risk industry.
By this, defense companies, whether they are privately owned or governmental entities, need to adhere to a stricter KYC regime and in-house banking policies, especially when working with cross border transactions with the EU or EEA states.
It seems that the writing has been on the wall for the past six months in regards to the defense payments industry, and the issues that were once dismissed as non-existent are now raising their head in their full regulatory glory. It has become a challenge not only to conduct payments in defense, which has led to the easy leeway of payments in crypto currencies.
Yet, this relatively novel method of payments in the defense industry that has sparked much anticipated attention has been scrutinized by 6 AMLD. In practice, it means that the defense industry is moving, slowly but quite surely, towards a simplified and streamline payments modus operandi for commercial defense contracts.
Be that as it may, operating in the crypto currency sphere is not an operation to be considered lightly.
Many countries, amongst them Israel - a large defense sector exporter, have recently imposed a taxation regime on crypto currency transactions, which results in full disclosure on the e-wallets issued and the transactions themselves.
One of the greatest fears that defense companies have is the fear of liquidating the funds back to the traditional banking system.
Although this operation seems burdensome to manage, it entails a great amount of flexibility in regards to swift and easy payments, and with proper in-house regulatory practices for 6 AMLD, liquidity of the crypto into the traditional banking system is possible.
It is in this day and age that the shift from the typical and traditional banking system towards fintech, crypto currencies and payments is inevitable, regardless of the industry involved.
Directive 6 AMLD, which categorized the defense industry on the higher end of the high risk industry for money laundering and terrorist financing, is now setting the sector ablaze with the enhanced due diligence and KYC demands. It will only be a matter of time till the new regulatory framework of the EU will spill over to other states, which in turn will force the market to request a separate regulation as a bottom-up initiative.
Yet, the mere and age-old question remains - will regulation follow the market, or, for a change, will the market follow the regulatory framework?
Ella Rosenberg is an EU Regulatory Consultant and Co-Founder at Armada. Aviel Marciano is a Strategic Consultant and Co-Founder at Armada
Commentary: The EU has adopted a stricter regulatory framework for defense industry payments. It will only be a matter of time until similar frameworks are adopted elsewhere in the world, according to consultants Ella Rosenberg and Aviel Marciano from Armada
Photo: Bigstock
By Ella Rosenberg and Aviel Marciano
Payments in the defense industry have become increasingly difficult to sustain, maintain and execute. The new anti-money laundering directive, 6 AMLD, has set a new limit on transactions, regardless of their source, and also set a new definition of the high risk industry.
By this, defense companies, whether they are privately owned or governmental entities, need to adhere to a stricter KYC regime and in-house banking policies, especially when working with cross border transactions with the EU or EEA states.
It seems that the writing has been on the wall for the past six months in regards to the defense payments industry, and the issues that were once dismissed as non-existent are now raising their head in their full regulatory glory. It has become a challenge not only to conduct payments in defense, which has led to the easy leeway of payments in crypto currencies.
Yet, this relatively novel method of payments in the defense industry that has sparked much anticipated attention has been scrutinized by 6 AMLD. In practice, it means that the defense industry is moving, slowly but quite surely, towards a simplified and streamline payments modus operandi for commercial defense contracts.
Be that as it may, operating in the crypto currency sphere is not an operation to be considered lightly.
Many countries, amongst them Israel - a large defense sector exporter, have recently imposed a taxation regime on crypto currency transactions, which results in full disclosure on the e-wallets issued and the transactions themselves.
One of the greatest fears that defense companies have is the fear of liquidating the funds back to the traditional banking system.
Although this operation seems burdensome to manage, it entails a great amount of flexibility in regards to swift and easy payments, and with proper in-house regulatory practices for 6 AMLD, liquidity of the crypto into the traditional banking system is possible.
It is in this day and age that the shift from the typical and traditional banking system towards fintech, crypto currencies and payments is inevitable, regardless of the industry involved.
Directive 6 AMLD, which categorized the defense industry on the higher end of the high risk industry for money laundering and terrorist financing, is now setting the sector ablaze with the enhanced due diligence and KYC demands. It will only be a matter of time till the new regulatory framework of the EU will spill over to other states, which in turn will force the market to request a separate regulation as a bottom-up initiative.
Yet, the mere and age-old question remains - will regulation follow the market, or, for a change, will the market follow the regulatory framework?
Ella Rosenberg is an EU Regulatory Consultant and Co-Founder at Armada. Aviel Marciano is a Strategic Consultant and Co-Founder at Armada
