On 13 December 2023, a political agreement was reached by the European Commission on establishing an Authority for Anti-Money Laundering and Countering the Financing of Terrorism (“AMLA”) by proposing a new Regulation of the European Parliament and the Council establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (“AMLA Regulation”). The proposal is part of the AML legislative package (“AML Package”), presented by the European Commission in July 2021. The AML Package also includes a new Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing establishing a single rulebook within the European Union aiming to ensure the uniform application of the rules within the Union, and a new Directive that will replace the existing Directive 2015/849/EU, amended by Directive (EU) 2018/843, both still being subject to discussion by the European co-legislators. Additionally, the AML Package contains aRegulation (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849, which has been adopted by the European legislators.
Bird & Bird previously has covered the broader subject of EU legislative proposal, included in the AML Package, in an article that can be found here.
Purpose and tasks of the AMLA
The AMLA will be a newly created decentralized agency of the European Union that will act within the scope of the EU legislation on anti-money laundering and countering terrorism financing (“AML/CTF Legislation”), as included in the AML Package. The purpose of the AMLA is to prevent money laundering and terrorism financing by contributing to enhanced supervision and improved cooperation between national supervisory authorities and also Financial Intelligence Units (“FIUs”). According to the AMLA Regulation, the AMLA will be essential to address the current shortcomings in the AML/CTF supervision that currently has national variations in practices and resources.
The AMLA’s tasks can be divided in the following five areas.
(i) Direct supervision of certain obliged entities
The AMLA will directly supervise a limited number of so called selected financial sector obliged entities (credit institutions, financial institutions, or a group of credit or financial institutions at the highest level of consolidation in the EU), that are exposed to the highest risk of money laundering and terrorism financing. The selection process will take place every three years, starting on the 1 July 2025, and based on objective criteria specified in the AMLA Regulation. For the selection, entities must have activities in a minimum number of member states, where, in at least a certain number of these, they must be categorised in the highest risk category.
Further to that, the AMLA may take over supervision of any individual financial sector obliged entity where there have been issues related to compliance with AML/CTF Legislation applicable to such entity, and the relevant supervisory authority has not taken adequate measures to address them in a timely manner. Such takeover can only take place following a procedure ending with a Commission Decision confirming the takeover.
(ii) Coordination and oversight of national AML/CTF financial supervisors
The AMLA will also have indirect supervisory role consisting of coordination and oversight of national AML/CTF financial supervisors by, for example, carrying out periodic thematic reviews and providing assistance to supervisors, e.g. by ensuring that financial supervisors are able to perform their tasks and supervision. The AMLA will also have the power to draft guidelines, opinions and recommendations to national supervisors.
(iii) Oversight of non-financial sector
With respect to non-financial supervisors, including self-regulatory bodies, the AMLA will have the power to conduct peer reviews of supervisory standards and practices to strengthen consistency and effectiveness in supervisory outcomes, request non-financial supervisors to investigate possible breaches and to consider imposing sanctions or remedial actions in respect of such breaches, carry out periodic reviews and provide assistance to supervisors.
(iv) Coordination and Support Mechanism for Financial Intelligence Units
The AMLA is empowered to, via Implementing Technical Standards (ITS), adopt binding templates and models for reporting of suspicious transactions and activities from obliged entities to FIUs. Additionally, the AMLA will play a pivotal role in organizing joint analyses of cross-border suspicious transactions, conduct reviews to improve their effectiveness, and host a communication network between FIUs: FIU.net.
(v) AMLA’s general powers
With respect to the general powers, the AMLA will have power to monitor developments across the internal market and assess threats, vulnerabilities and risk in relation to money laundering and terrorism financing, adopt Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) where this is provided for in the applicable AML/CTF Legislation. Also, the AMLA will have a broad power to adopt guidelines or recommendations addressed to obliged entities, AML/CTF supervisors or FIUs.
In the context of direct supervision, the AMLA shall have the powers to adopt binding decisions, administrative measures, and pecuniary sanctions towards directly supervised selected obliged entities. The AMLA will have the power to address binding decisions to selected obliged entities and to impose administrative sanctions on such up to a maximum of 10 % of turnover or €10 million, whichever is higher.
What happens next?
The text of the provisional agreement will now be finalized and presented to the member states’ representatives and the European Parliament for approval. If approved, the Council and the Parliament will have to formally adopt the text. Since negotiations still will have to be conducted between the Council and the Parliament in the ordinary legislative procedure, we would expect the agency to begin its direct supervision from early 2026. Currently the negotiations on the selection process of the seat between the Council and the European Parliament are still ongoing. Once that has been agreed upon, the seat location will be introduced in the regulation.
Conclusions
The establishment of the AMLA and its powers will impact the landscape for both financial and non-financial national authorities, FIUs as well as obliged entities. The AMLA will be the central authority coordinating national authorities to ensure the correct and consistent application of EU rules. The AMLA’s powers — e.g. direct supervision of a certain number of selected obliged entities — is expected to increase the demand of legal compliance to AML/CTF regulations. The establishment of the AMLA is also expected to increase the potential of the proposed AML Package to address the current shortcomings and to enhance the application consistency within the area.
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