The new European Anti-Money Laundering Authority

1. The new European
Anti-Money
Laundering Authority
Overview
The European Union has made a decisive move to combat money laundering and terrorist
financing with the creation of a new regulatory body known as the Anti-Money Laundering
Authority (AMLA). This development is part of a broader package of legislative proposals aimed
at strengthening the EU's anti-money laundering and counter-terrorism financing (AML/CFT)
framework. The measures have been shaped by the input of the European Parliament,
particularly the Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs
committees.
AMLA is set to be the centerpiece of an integrated system for supervisory authorities across all EU
Member States, with a mandate that includes direct supervisory powers and the ability to impose
fines for non-compliance. The fines could be substantial, amounting to as much as 10% of the
annual turnover or 10 million euros, whichever is higher. The Authority will initially focus on
supervising approximately 40 financial entities identified as having the highest risk profile and
operating across multiple Member States. AMLA will also provide support and coordination to
national Financial Intelligence Units (FIUs) to ensure effective enforcement of the unified AML
rulebook.
In terms of the scope of its supervisory role, AMLA will target a range of entities, from banks and
asset managers to real estate agents and high-value dealers, including high-level professional
football clubs. These entities will be required to perform due diligence on their customers,
understand the ownership structure of companies, and establish risk profiles for money
laundering and terrorist financing within their sectors. Moreover, AMLA's remit will extend to
creating and updating a list of high-risk third countries and mediating disputes between national
financial supervisors.
One of the crucial aspects of the new AML framework is the enhancement of transparency,
particularly concerning beneficial ownership. National central registers will hold this information,
which will be digitally accessible and include both current and historical data. This information
will be made available to FIUs, AMLA, and other competent authorities. The EBA has emphasized
the importance of harmonizing and linking beneficial ownership registers across the EU.
The package proposes a single EU rulebook for AML/CFT, which includes detailed rules on
customer due diligence, beneficial ownership, and the responsibilities and powers of supervisors
and FIUs. This includes connecting national bank account registers to provide quick access to
FIUs for information on bank accounts and safe deposit boxes, as well as new requirements for
transparency in crypto-asset transactions.
AMLA is expected to be established by 2023, become operational by 2024, and fully staffed by
2025. However, the location of the Authority is yet to be determined through negotiations among
Member States.
The proposal for AMLA and the legislative package is currently under discussion, with the
European Parliament set to start negotiations after confirmation during a plenary session in April.
This move marks a significant step towards harmonizing AML/CFT efforts across the EU, ensuring
consistency and reducing discrepancies between Member States in the fight against financial
crime​
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2. GenesisandMissionofAMLA:
PioneeringFinancialSecurity
intheEU
o1
The European Union's financial landscape is undergoing a significant transformation with
the advent of the Anti-Money Laundering Authority (AMLA), a new beacon in the fight
against financial crime. AMLA stands as a testament to the EU's commitment to
strengthening its financial regulatory framework, particularly in addressing the complex
challenges of money laundering and terrorist financing (AML/CFT).
CentralizedOversightforHigh-RiskEntities
AMLA is poised to take up the mantle as the centralized oversight body for the highest-risk
financial entities that span the European Union. Its establishment marks a critical step in
supervising institutions that operate across multiple EU states, reflecting a strategic and
targeted approach to financial oversight. This central authority will include at least one
high-risk entity from each member state within its purview.
ExpandingtheRegulatoryScope
In recognition of the evolving financial ecosystem, AMLA's regulatory scope will also cover
crypto asset service providers. This inclusion acknowledges the rapid growth and
integration of digital assets into mainstream finance and the corresponding need for
vigilant regulatory measures to manage the associated risks.
HarmonizationofAML/CFTStandards
With AMLA, the EU envisions a more unified regulatory landscape. This harmonization aims
to ensure that AML/CFT rules are applied consistently across the board, thereby improving
the collective efficacy of the member states in curtailing illicit financial flows. Uniformity in
application is essential for creating a resilient financial environment, unyielding to the
tactics of money launderers and terrorist financiers.
OperationalDynamicsofAMLA
AMLA's operational dynamics extend beyond direct supervision. The authority will serve as
a mediator to resolve disputes between national supervisory bodies, fostering
collaboration and coherence in supervisory actions. Additionally, AMLA will provide
indispensable support to financial intelligence units (FIUs) across the EU, assisting in the
analysis of suspicious transactions.
Furthermore, AMLA will manage FIU.net, the EU's platform for exchanging information and
intelligence related to financial transactions. This platform is a linchpin for sharing vital
data and insights that can preempt and combat financial crimes.
KeytakeawaysforAMLexpertsandcomplianceofficers
The genesis of AMLA heralds a new era for financial security within the EU. Its
comprehensive approach, extending from high-level supervision to intricate analysis of
financial transactions, embodies the EU's strategic blueprint for a robust financial sector.
AMLA is set to become a cornerstone of the EU's financial system, safeguarding it against
the perils of modern financial crimes and reinforcing the integrity of financial practices
across the continent.
The establishment and operational rollout of AMLA will undoubtedly be a subject of interest
to financial entities, regulatory bodies, and the broader public keen on understanding the
future of financial regulation and security within the EU.
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3. 03
Regulatory framework
o2
In the evolving tapestry of the European Union's financial regulations, the introduction of
the Anti-Money Laundering Authority (AMLA) marks a significant stride towards fortifying
the integrity of the financial system. AMLA is positioned as a vanguard institution, with a
mandate to enforce protective measures and establish robust safeguards for
whistleblowers.
Protective Measures and Whistleblower Safeguards
A cornerstone of AMLA's mandate is to create a secure environment for reporting violations
of financial regulations. The framework emphasizes the importance of whistleblowers in
maintaining transparency and accountability within the financial sector. By ensuring their
protection, AMLA is set to build a culture of integrity and ethical responsibility. This move is
consistent with the EU's broader efforts to strengthen legal protections for whistleblowers,
aiming to encourage the reporting of breaches of EU law and ensuring these individuals
are shielded from retaliation.
Location and Logistics
The choice of location for AMLA's headquarters is a matter of considerable interest and
debate, with several European cities in contention to host the prestigious institution. The
decision process encompasses various factors, including logistical capabilities, political
considerations, and the strategic placement within the EU's financial network. The
European Parliament plays a crucial role in this process, adhering to the principles set out
by the Court of Justice to ensure a transparent and inclusive selection process.
Implications for Financial Entities
The impending operationalization of AMLA comes with a heightened sense of readiness
among financial entities within the EU. Banks and financial institutions are expected to
face stricter AML regulatory frameworks and a more rigorous supervisory approach. In
anticipation of these changes, it is imperative for these entities to critically review and
update their AML strategies, aligning them with the upcoming regulatory landscape.
Establishing a strong AML governance framework is essential, particularly for entities with
operations spanning the EU.
Key takeaways for AML experts and compliance officers
The establishment of AMLA is a transformative event for European financial regulation. It
heralds a new age of strategic oversight, harmonization of regulatory standards, and
strengthened defenses against money laundering and terrorism financing. The ripple
effects of AMLA's activities will be felt across the entire spectrum of financial operations
within the EU. Financial institutions must thus adapt, ensuring compliance and
collaboration within the new regulatory environment shaped by AMLA's guiding principles.
As the details of AMLA's implementation continue to be ironed out, the financial sector
must remain vigilant and proactive in embracing the rigorous demands of a more secure
and transparent financial system within Europe.

4. European Know Your Customer
(KYC) regulatory framework
o3
The European Union has been actively refining its regulatory framework to
combat money laundering and terrorist financing, with a specific emphasis on
harmonizing Know Your Customer (KYC) and Customer Due Diligence (CDD)
measures across member states. The EU's approach includes enhancing the
electronic identification and remote KYC processes to effectively manage and
mitigate financial risks within the banking sector and the broader financial
market.
KYC requirements in the EU are complex, primarily due to the varying speeds of
adoption and integration of national and EU regulations. The EU member states
are focusing on creating a digital economy that facilitates efficient, robust KYC
and CDD processes, aiming for a seamless integration that will bolster the fight
against illicit financial flows such as money laundering, terrorist financing, and
other financial crimes.
The EU's legislative framework for AML/CFT has undergone several amendments,
with the sixth Anti-Money Laundering Directive (AMLD 6) coming into effect in
2021. This directive has established a more consistent definition of money
laundering and expanded the scope of responsibilities for financial intelligence
units and supervisory bodies. AMLD 6 also includes provisions for a harmonized
approach to supervising financial entities and individuals that are obligated to
undergo AML and CTF measures.
The integration of EU directives into the national laws of member states like the
Netherlands and Luxembourg illustrates the regional commitment to stringent
AML/CFT enforcement. The Netherlands, for example, adheres to the Anti-Money
Laundering and Anti-Terrorist Financing Act (WWFT) and the Financial
Supervision Act (WFT), aligning with EU directives to ensure a unified and
stringent approach to financial supervision.
In Luxembourg, the response to investigations such as OpenLux has reinforced
the government's stance on maintaining a robust AML and CTF framework. The
Grand Duchy's financial regulatory body, the Commission de Surveillance du
Secteur Financier (CSSF), enforces AML, KYC, and CTF regulations, requiring
financial institutions to conduct a risk-based approach throughout the client
onboarding process.
As the EU continues to evolve its AML/KYC regulatory framework, member states
are expected to comply with the established standards and are advised to
perform comprehensive assessments of their AML policies and practices. The
EU's commitment to creating an effective AML/CFT framework is evident through
its continuous legislative reforms and the proposed creation of an EU-wide
supervisory agency to streamline AML enforcement efforts across borders.
For financial entities operating within the EU, this translates to an expectation of
heightened regulatory standards and supervision, necessitating the adoption of
advanced identity verification technologies and practices to remain compliant
and secure against sophisticated financial crimes.
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