On July 21, 2021 the European Commission presented an ambitious package of legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing (AML/CTF) rules.
According to the European Commission: "This package is part of the Commission's commitment to protect EU citizens and the EU's financial system from money laundering and terrorist financing. The aim of this package is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system."
In a nutshell, the new package encompasses four legislative proposals. The first is a regulation that will have a direct regulatory effect for Member States. It will be complemented by a Directive around clarifications on risk-assessments, beneficial-owner register features, FIUs (financial intelligence units) or administrative measures and fines to name a few. Both are intended to sharpen the framework and create a single European rulebook to be applied in the fight against Money Laundering and Terrorist Financing.
In actuality, there are few completely new rules but rather they could be more clearly defined as clarifications. Such a single set of rules will be helpful, as it will at least try to mitigate a number of weaknesses that the transposition of pure AML Directives in the past have created, since each Member State had some room to navigate when transposing it nationally. Thus, greater harmonisation and convergence should be achieved and this should also facilitate enforcement (see The new EU-level Anti-Money Laundering Authority (AMLA)). But as always, the devil will be in the details, since certain specifics might suffer in a "one size fits all" context more easily, so that is an area that will need to be watched carefully.
Then there is the AMLA, the new supervisory authority for AML in the Financial Sector, taking over the role currently played by the European Banking Authority (EBA). The AMLA is set to be the new watchdog, taking care of the proper implementation and application of AML rules and regulations from an EU perspective, since it will assert more direct oversight on Member States and local regulators. Some of the regulators have been recently criticised as has the overall AML/Counter Terrorist Financing (CTF) approach for the Banking Sector as per the European Court of Auditors. Hence, there seems to be room for improvement that could be achieved by the AMLA.
The AMLA would also adopt specific guidelines on the risk-based approach, regulatory technical standards and the different aspects of the above Rulebook. The impact of the AMLA will need to be seen from 2024, but at least it will be a dedicated body that will centralise certain elements more systematically and will also have a stronger coordination role for the FIU network. It will as well directly supervise some of the riskiest financial institutions that operate in a large number of Member States or require immediate action to address imminent risks.
The intention is that the AMLA will be fully operational by 2026 with around 250 staff and it will be interesting to see which Member State(s) will be their eventual seat since a number of volunteers have already expressed their interest.
Last but not least, there is a dedicated regulation on crypto-assets, which will support a level playing field in this fast-evolving area that has also attracted regulatory attention in countries outside of the EU. This regulation will follow the lines of the existing information requirements accompanying the transfers of funds and the Financial Action Task Force (FATF) Recommendation 15 on new technologies. Thus, there should be more transparency on the originator and beneficiaries within that context.
Ultimately, we see many moves in the right direction, but the efficient implementation and practical impact remain to be seen.
Partner, Forensic Services and Financial Crime Leader, PwC Luxembourg
Tel: +352 49 48 48 4153
Partner, Audit, specialised in AML for the Banking industry, PwC Luxembourg
Tel: +352 49 48 48 2451
Partner, Risk Assurance, specialised in AML for the Asset Wealth Management industry, PwC Luxembourg
Tel: +352 49 48 48 5687
Director, Assurance, Finance Crime, PwC Luxembourg
Tel: +352 49 48 48 5617