In December of 2023, the EU Council and Parliament reached a provisional agreement on creating a new European authority for countering money laundering and the financing of terrorism, otherwise known as the Anti-Money Laundering Authority (AMLA). It aims to protect EU citizens and the EU’s financial system against money laundering and terrorist financing. In this article, we will take a closer look at how the AMLA will achieve this.
AMLA’s Role
The current goals for the Anti-Money Laundering Authority are to better the fight against financial crime. In order to achieve this, AMLA is allowed to take the following measures:
- AMLA will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector.
- AMLA will create and integrate comprehensive systems with national supervisors to ensure AML and Counter Terrorist Financing (CTF) regulations are complied with, taking into account the cross-border nature of financial crime.
- AMLA will have a supporting role with respect to non-financial sectors, and coordinate financial intelligence units in member states.
- AMLA will impose sanctions in cases of serious, systematic or repeated breaches of directly applicable requirements.
AMLA’s Supervisory Powers
The preliminary agreement enhances the authority of AMLA, granting it the direct oversight of specific categories of credit and financial institutions, including crypto asset service providers, particularly those deemed high-risk or operating internationally.
AMLA will undertake the identification of high-risk credit and financial institutions across multiple member states. The selected obligated entities will be subject to supervision by joint supervisory teams led by AMLA, responsible for conducting assessments and inspections. The agreement authorises the supervision of up to 40 groups and entities in the initial selection process.
For those entities not chosen, AML/CFT supervision will predominantly remain at the national level. In the non-financial sector, AMLA will play a supportive role, conducting reviews and investigating potential violations of the AML/CFT framework. AMLA will possess the authority to issue non-binding recommendations. National supervisors can voluntarily establish a college for a non-financial entity operating internationally if deemed necessary.
The provisional agreement broadens the scope and content of AMLA’s supervisory database by requiring the Authority to establish and regularly update a central database containing information pertinent to the AML/CFT supervisory system.
Targeted Financial Sanctions
The Authority will ensure that selected obligated entities have established internal policies and procedures to enforce targeted financial sanctions, asset freezes, and confiscations.
Governance
AMLA will consist of a general board comprising representatives from supervisors and Financial Intelligence Units across all member states. Additionally, an executive board, serving as the governing body, will be formed, consisting of the Authority’s chair and five independent full-time members. The Commission’s veto right over certain powers of the executive board, particularly its budgetary powers, has been removed by the Council and the Parliament.
Whistleblowing
The provisional agreement introduces an enhanced whistleblowing mechanism. AMLA will exclusively handle reports from the financial sector concerning obligated entities. It will also have the authority to review reports from employees of national authorities.
Disagreements
AMLA will be empowered to resolve disputes with a binding effect within financial sector colleges and, in other instances, at the request of a financial supervisor.
Ongoing Negotiations
Negotiations between the Council and Parliament persist on the regulation concerning anti-money laundering requirements for the private sector and the directive on anti-money laundering mechanisms.
The Next Steps for AMLA
Currently, the immediate next step includes finalising the text of the agreement and presenting it to the representatives of member states and the European Parliament for approval.
It’s estimated that AMLA will begin direct supervision of ‘high-risk’ institutions in 2026/2027.
With the start of AMLA, three main goals have been outlined:
- Finding the AMLA seat: Negotiations are underway between the Council and the European Parliament to establish the principles for selecting the location of the new Authority’s seat. Once agreed upon, the seat selection process will conclude, and the location will be incorporated into the regulation.
- Creating Technical Standards: The EU AML coordination group has already pinpointed 80 Implementing or Regulatory Technical Standards (ITS/RTS) necessary to delineate the specifics of the new unified AML/CFT rulebook.
- Formulating Supervisory Policies and Procedures: This involves developing Joint Supervisory Team structures, defining methods of collaboration with national AML authorities, and crafting Memoranda of Understanding for cooperation with other EU and third-country agencies.
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