The new European AML Authority (“AMLA”) and the EU’s Single AML Rulebook

On the 20 July 2021, the European Commission proposed a major reform and unveiled a plan for a European AMLA and presented an ambitious AML package, made up of 4 legislative proposals, to strengthen the EU’s anti-money laundering and combating the funding of terrorism (“AML/CFT”) rules. The legislative package is currently being discussed by the European Parliament and Council. The intention of these proposals is to have a consistent framework to ease compliance for obliged entities who are subject to AML/CFT rules, especially for those who operate within cross-border activities. The Authority will have direct supervision powers to crack down on illicit finance across all EU Member States and moreover, it will be able to impose fines, with total penalties not exceeding 10 per cent of annual turnover or EUR10 million, whichever is higher.

AMLA will be established in 2023, operational by 2024 and it will recruit roughly 250 employees by 2025, 100 of which will be allocated specifically for supervision. The location of such authority is still to be confirmed through negotiations with all Member States. Furthermore, AMLA will have full independence, that is, will have its own executive board, and its direct supervision will be a baseline alignment with that of the Financial Action Task Force (“FATF”). That is, the EU will maintain its own black and grey lists, reflecting the FATF listing. It will also be able to list countries that pose a threat to the EU’s financial system based on its assessment, which are not listed by FATF.

This new authority will supervise some of the EU’s ‘riskiest’ financial and credit institutions by 2026, with the aim to crack down on money laundering scandals. It will focus its efforts on large lenders who operate in at least seven EU Member States and are deemed ‘high-risk’ by at least four. Further scrutiny will also be carried out on those financial institutions, lenders and other non-bank financial institutions operating in at least 10 European countries, who engage in ‘sufficiently risky’ business. AMLA’s integrated system of AML/CFT supervision across the EU will be based on common supervisory methods and convergence of high supervisory standards. A list will also be published and updated every three years of all those institutions who will be under direct supervision. The tools made available to AMLA will be comprehensive as they are at a national level, with the possibility to address binding decisions and to impose significant fines in instances of non-compliance with EU requirements.

It has been made clear that local FIUs will not be excluded from the supervisory process. The aim is to create a joint supervisory team between AMLA and the local FIUs. AMLA will mainly function as the central authority coordinator and a facilitator for FIUs, and it will provide support, thus having a better overview of supervision and dialogue. The authority will co-ordinate and assist national supervisory authorities to increase their effectiveness in enforcing the single rule book whist ensuring homogenous high quality supervisory standards, approaches and risk assessment methodologies. Additionally, it will host the communications through the FIU.net and will ensure the organisation and conduct of joint analyses of suspicious cross-border transactions and activities.

A single EU rule book for AML/CFT will be created, based on regulatory technical standards and a harmonised supervisory methodology, and best practices across the EU. This would include more detailed rules on Customer Due Diligence (“CDD”) (a clearer criteria for determining the nature and type of CDD measures that are to be commensurate with the different levels of ML/FT risk), Beneficial Ownership (a clarification of the current rules as to achieve a consistent interpretation of the definition) and the powers and tasks of supervisors and FIUs (common rules on their functions and powers, maximum time-limits for requests of information and clarifications on the obligation for FIUs in providing feedback to entities). Existing national registers of bank accounts will be connected thus providing faster access for FIUs to information on bank accounts and safe deposit boxes. The European Commission will also be providing access of this system to law enforcement agencies, to aid them in their financial investigations and the recovery of criminal assets in cross-border cases. Additionally, new requirements have been proposed for crypto-assets and crypto-assets service providers, to collect and make accessible data concerning the originators and beneficiaries of transfers in those assets, thus more transparency.

The European Banking Federation (“EBF”) announced that the AML package proposed by the European Commission fails to address the fundamental dimensions of how information can be shared seamlessly between banks, FIUs and law enforcement by leveraging into new technologies. It encourages the use of Public Private Partnerships in combating cross-border and multi-layered money laundering, whereby information will not be limited to one bank but will rather be shared amongst obliged entities and law enforcement. Information sharing in the context of fighting financial crime is critical in ensuring the effectiveness of the AML/CFT rules. EBF also demands “an intelligence-led approach to effectively mitigate money laundering risks and detect financial crime” across Europe. The EBF also believes that the Beneficial Owner (UBO) registers need to be harmonised and interlinked but also significantly strengthened.

The new proposals will be quite revolutionary, definitely a step in the right direction, but this will strengthen the AML/CFT rules by having clear expectations, consistency and a harmonisation of requirements across all member states, meaning less to no divergences between member states.

KPMG’s Risk Consulting AML/CFT professionals are fully committed to assist you with the overall implementation and understanding of these upcoming AML/CFT updates. With our broad ranging services, we aim to provide you with leading edge AML/CFT advice and assistance to assist you in your different requirements.

This new authority will supervise some of the EU’s ‘riskiest’ financial and credit institutions by 2026, with the aim to crack down on money laundering scandals. It will focus its efforts on large lenders who operate in at least seven EU Member States and are deemed ‘high-risk’ by at least four. Further scrutiny will also be carried out on those financial institutions, lenders and other non-bank financial institutions operating in at least 10 European countries, who engage in ‘sufficiently risky’ business. AMLA’s integrated system of AML/CFT supervision across the EU will be based on common supervisory methods and convergence of high supervisory standards. A list will also be published and updated every three years of all those institutions who will be under direct supervision. The tools made available to AMLA will be comprehensive as they are at a national level, with the possibility to address binding decisions and to impose significant fines in instances of non-compliance with EU requirements.

It has been made clear that local FIUs will not be excluded from the supervisory process. The aim is to create a joint supervisory team between AMLA and the local FIUs. AMLA will mainly function as the central authority coordinator and a facilitator for FIUs, and it will provide support, thus having a better overview of supervision and dialogue. The authority will co-ordinate and assist national supervisory authorities to increase their effectiveness in enforcing the single rule book whist ensuring homogenous high quality supervisory standards, approaches and risk assessment methodologies. Additionally, it will host the communications through the FIU.net and will ensure the organisation and conduct of joint analyses of suspicious cross-border transactions and activities.

A single EU rule book for AML/CFT will be created, based on regulatory technical standards and a harmonised supervisory methodology, and best practices across the EU. This would include more detailed rules on Customer Due Diligence (“CDD”) (a clearer criteria for determining the nature and type of CDD measures that are to be commensurate with the different levels of ML/FT risk), Beneficial Ownership (a clarification of the current rules as to achieve a consistent interpretation of the definition) and the powers and tasks of supervisors and FIUs (common rules on their functions and powers, maximum time-limits for requests of information and clarifications on the obligation for FIUs in providing feedback to entities). Existing national registers of bank accounts will be connected thus providing faster access for FIUs to information on bank accounts and safe deposit boxes. The European Commission will also be providing access of this system to law enforcement agencies, to aid them in their financial investigations and the recovery of criminal assets in cross-border cases. Additionally, new requirements have been proposed for crypto-assets and crypto-assets service providers, to collect and make accessible data concerning the originators and beneficiaries of transfers in those assets, thus more transparency.

The European Banking Federation (“EBF”) announced that the AML package proposed by the European Commission fails to address the fundamental dimensions of how information can be shared seamlessly between banks, FIUs and law enforcement by leveraging into new technologies. It encourages the use of Public Private Partnerships in combating cross-border and multi-layered money laundering, whereby information will not be limited to one bank but will rather be shared amongst obliged entities and law enforcement. Information sharing in the context of fighting financial crime is critical in ensuring the effectiveness of the AML/CFT rules. EBF also demands “an intelligence-led approach to effectively mitigate money laundering risks and detect financial crime” across Europe. The EBF also believes that the Beneficial Owner (UBO) registers need to be harmonised and interlinked but also significantly strengthened.

The new proposals will be quite revolutionary, definitely a step in the right direction, but this will strengthen the AML/CFT rules by having clear expectations, consistency and a harmonisation of requirements across all member states, meaning less to no divergences between member states.

KPMG’s Risk Consulting AML/CFT professionals are fully committed to assist you with the overall implementation and understanding of these upcoming AML/CFT updates. With our broad ranging services, we aim to provide you with leading edge AML/CFT advice and assistance to assist you in your different requirements.