The European Commission (the “Commission”) continually demonstrates its commitment to strengthening measures for countering money laundering and terrorist financing at EU level, in recognition of the threats posed to the integrity of the economy and financial system of the European Union, and to the security of EU citizens.
In May 2020, the Commission adopted an Action Plan, which aimed to improve the implementation of the AML/CTF framework across the EU, address weaknesses and vulnerabilities, and strengthen the international dimension of the framework. The Commission then submitted a proposal, in July 2021, for the establishment of a new EU authority responsible for assisting Member States in their efforts to fight threats of money laundering and terrorist financing.
The creation of the new EU authority would increase supervision at EU level, and would promote high quality supervisory standards at national level for Member States. In addition, it would create a support and co-operation mechanism between the Financial Intelligence Units of Member States, for the easier exchange of data and information by hosting an information exchange platform. On the 13th December 2023, the European Council and European Parliament reached a provisional agreement (the “Agreement”) to create this new European authority, known as the Anti-Money Laundering Authority (the “AMLA”).
With regards to the financial sector, the AMLA will have direct supervisory powers over certain high-risk credit and financial institutions, such as crypto asset service providers, especially where such institutions engage in cross-border activities. The AMLA’s operations will involve a selection of credit and financial institutions that represent a high risk across several Member States.
The Agreement provides that the AMLA may supervise up to 40 groups and entities in its first selection process, and joint supervisory teams led by the AMLA will carry out assessments and inspections. All obligated entities which are not selected will continue to be supervised by their national regulators.
In relation to sanctions compliance, the AMLA will investigate to determine whether selected obliged entities have appropriate internal policies and procedures in place to ensure that targeted financial sanctions, asset freezes and confiscations are properly implemented.
Whistle-blowing reports relating to the financial sector will also fall under the remit of the AMLA, and it will be able to receive reports from employees of national authorities. In cases of disputes or disagreements between national authorities in the financial sector, the AMLA will have the power to impose binding settlements.
As for the non-financial sector, the AMLA is set to have a supporting role under the terms of the Agreement. It will carry out reviews and investigate potential breaches in the application of the AML/CFT framework, as well as issuing non-binding recommendations.
There are certain technical matters to be finalised before the formal creation of the AMLA. Firstly, the Agreement will need to be formally adopted by the European Parliament and the Council, and this can be done once the Agreement receives the approval of the members of the European Parliament. Moreover, the selection process for the seat of the AMLA is still under negotiation, which will be used to determine the country in which the AMLA will be physically located.
By entering into the Agreement, it is clear that the EU’s institutions are taking action to provide increased support to Member States, to bolster and improve the efforts made at national level in the application of the AML/CTF framework. The facilitation of increased co-operation between Member States will enhance efficiency in the process of detecting and tackling threats of money laundering and terrorist financing within the EU, which is crucial given that this is an area with constant development as criminals try to exploit the legal framework.
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