At a glance
- The EU has provisionally agreed to establish an Anti-Money Laundering Authority (AMLA) to combat money laundering and terrorism financing, the first of its kind for the region
- AMLA will have direct oversight of high-risk, cross-border financial institutions and indirect supervisory powers over other financial and non-financial entities
- Looking to harmonise AML/CFT approaches across the EU, the new authority will be able to conduct audits, impose penalties, and issue fines to institutions under its direct supervision
The European Council (EC) and parliament have reached a provisional agreement to create a European authority for countering money-laundering and the financing of terrorism: an Anti-Money Laundering Authority (AMLA).
AMLA will have direct supervisory powers over high-risk cross-border institutions and indirect supervisory powers across all other entities in the financial sector, with oversight power over the non-financial sector.
It introduces one of the biggest changes to the EU’s anti-money laundering framework yet, according to Daniel Ferrie, European Commission spokesperson for financial services, financial stability and Capital Markets Union.
Supervision of financial institutions
George Voloshin, global expert on anti-financial crime at the Association of Certified Anti-Money Laundering Specialists, says AMLA is “very welcomed” to better address the threats Europe faces.
The new authority will take over functions from some existing agencies, Mr Voloshin says, either supranational, like the European Banking Authority (EBA), or member state government groups with responsibility for anti-money laundering and combating the financing of terrorism (AML/CFT).
“AMLA will have a much more granular overview compared with what the EU has today, which doesn’t currently have any regulator for AML/CFT. It’s all decentralised at the level of member states,” Mr Voloshin says.
Its responsibility will involve the direct supervision of high-profile, higher-risk entities that are particularly exposed to money-laundering risks. Despite the EBA’s mandate to prevent money-laundering, it does not currently have direct oversight functions such as those proposed under AMLA.
“AMLA will centrally oversee the most exposed institutions while allowing member states to regulate others that are better protected in terms of their exposure,” Mr Voloshin says.
The provisional agreement proposes that AMLA directly supervise up to 40 entities in the first selection process. It will then have the power to directly regulate these institutions, including to examine and give instructions, conduct audits and inspections and to enforce penalties like fines.
AMLA will be able to levy fines of up to €10m, or 10% of the entity’s annual turnover. Fines can be imposed without action from the apposite member state and will enforce a clear “naming and shaming” effect, Mr Volshin says.
“Institutions under direct supervision will be those designated as high risk or selected to be particularly important financial institutions with a larger footprint and a more diverse exposure to clients, particularly international clients,” Mr Voloshin says.
This could include crypto-asset service providers if they are considered high-risk or operate across borders. The list of selected high-risk cross-border institutions will be reviewed every three years, says Mr Ferrie.
It is not clear yet under which parameters these entities — including banks — will be chosen. The EU also plans to include non-banking institutions: sufficiently big insurance groups or asset managers could be included, for example.
AMLA will monitor that selected entities have internal policies and procedures to ensure the implementation of targeted financial sanctions, asset freezes and confiscations.
Beyond the 40 selected entities, AMLA will indirectly supervise less exposed institutions through national supervisors. Unlike with larger, higher-risk entities, AMLA will not be able to govern these institutions directly, but will instead instruct national authorities.
“AMLA may ask national authorities to strengthen its measures or change how an institution is supervised at the national level. It will work to implement common standards and a shared vision of AML/ CFT in Europe for these less exposed groups,” Mr Voloshin says.
Co-ordination and structure
The new EU authority will become the host of the information exchange platform for financial intelligence units (FIUs) in Europe, FIU.net, which is currently hosted by Europol. AMLA will take over Europol’s role in terms of co-ordinating EU-based FIU activities and ensuring that they have the necessary IT tools and infrastructure.
“AMLA may chair meetings to discuss new technologies, emerging threats and new ways to co-operate and exchange information,” Mr Voloshin says. The new authority will also take over functions from the EBA for issuing guidance on AML/CFT.
A decision is still to be made regarding the location of AMLA’s seat. The EU has received nine applications from member states looking to host the authority, says Mr Ferrie.
“There is some competition underway between member states to host the AMLA body. Its location could affect its future orientations, depending on how active the country is in AML/CFT today,” Mr Voloshin says.
“Maybe it will be based in the Baltics because they have worked hard to improve their standing in Europe after some money-laundering scandals, but it’s currently something to be decided by member states.”
The text of the provisional agreement will now be finalised and presented to member states’ representatives and the European Parliament for approval. If approved, the EC and the parliament will have to formally adopt the texts.
Negotiations in the EU about anti-money laundering requirements for the private sector, as well as the directive on anti-money laundering mechanisms, remain ongoing.
In the meantime, AMLA will be established and operating indicatively by 2027.
