In 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”). The proposal is part of the AML legislative package (“AML Package”), presented by the European Commission in July 2021.
The AML Package also includes, among other things, 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.
Purpose and tasks of AMLA
The AMLA will be a newly created decentralized EU authority that will act within the scope of the EU legislation on anti-money laundering and countering terrorism financing (“AML/CTF Legislation”). The purpose of 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, 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, based on objective criteria specified in the AMLA Regulation.
Furthermore, 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.
(ii) Coordination and oversight of national AML/CTF financial supervisors
The AMLA will have the power to draft guidelines, opinions and recommendations to national AML/CTF supervisors and also have indirect supervisory role consisting of coordination and oversight of national AML/CTF financial 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.
(iv) Coordination and Support Mechanism for Financial Intelligence Units
The AMLA is empowered, via Implementing Technical Standards (ITS), to adopt binding templates and models for the 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 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 will have the powers to adopt binding decisions, administrative measures, and penalties towards directly supervised selected obliged entities.
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.
On February 22, 2024, an agreement on Frankfurt as a seat location for AMLA has been reached by the Council and the Parliament. AMLA is expected to begin operations mid-2025.
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Eleonora Pavliouk, Senior Associate at Bird & Bird
Julia Klingberg, Associate at Bird & Bird