Republished with full copyright permissions from The San Francisco Press.

In a significant development, the Council and the EU Parliament have reached a provisional agreement on the establishment of the new European authority for countering money laundering and financing of terrorism (AMLA). This groundbreaking authority, a pivotal aspect of the anti-money laundering package, is designed to safeguard the EU’s financial system and its citizens against the perils of money laundering and terrorist financing.

AMLA is poised to exercise both direct and indirect supervisory powers over high-risk obliged entities within the financial sector. Notably, the recent agreement has deferred a decision concerning the location of the agency’s seat, an issue that remains under active deliberation via separate channels.

Given the transnational nature of financial crime, the forthcoming authority is anticipated to elevate the efficacy of the anti-money laundering and countering the financing of terrorism (AML/CFT) framework by establishing an integrated mechanism that collaborates with national supervisors to ensure compliance with AML/CFT-related obligations in the financial sector. Additionally, AMLA is tasked with extending its support to non-financial sectors and coordinating financial intelligence units across member states.

An essential dimension of AMLA’s mandate pertains to its ability to enforce compliance. In cases involving severe, systematic, or repeated breaches of directly applicable requirements, the Authority is empowered to levy monetary sanctions on selected obliged entities, signaling a resolute approach towards upholding regulatory standards.

The provisional agreement bolsters AMLA’s supervisory powers, enabling the authority to directly oversee specific types of credit and financial institutions, including crypto asset service providers, provided they are deemed high-risk or operate across borders. AMLA will orchestrate the scrutiny of selected high-risk entities through joint supervisory teams, reflecting a concerted effort to conduct assessments and inspections meticulously. In the initial phase, up to 40 groups and entities are anticipated to fall under the purview of AMLA’s supervision.

For non-selected obliged entities, AML/CFT supervision will continue predominantly at the national level. Furthermore, in the non-financial sector, AMLA will play a supportive role by conducting reviews and investigating potential breaches in the application of the AML/CFT framework. The authority is also vested with the authority to issue non-binding recommendations, while national supervisors retain the option to establish a college for non-financial entities operating across borders, as deemed necessary.

The provisional agreement also encompasses an expansion of AMLA’s supervisory database, mandating the establishment and maintenance of a comprehensive central repository of information relevant to the AML/CFT supervisory system.

In addition to its supervisory role, AMLA will assume the responsibility of monitoring that selected obliged entities implement internal policies and procedures to execute targeted financial sanctions, including asset freezes and confiscations.

At the heart of AMLA’s governance structure lies a general board, comprising representatives of supervisors and Financial Intelligence Units from all member states, alongside an executive board that will form the governing body of the authority. This executive board, composed of the authority’s chair and five independent full-time members, will operate without the Commission’s veto right on some of its powers, notably its budgetary authority.

Significantly, the provisional agreement also outlines the introduction of a reinforced whistle-blowing mechanism. AMLA will exclusively handle reports from the financial sector, in addition to being empowered to address reports from employees of national authorities.

Moreover, AMLA is imbued with the authority to resolve disputes with a binding effect within the context of financial sector colleges and other cases upon the request of a financial supervisor.

The negotiations surrounding the location of AMLA’s seat are currently underway, with the principles of the selection process under deliberation. Upon finalizing the selection process, the agreement will culminate in the formal introduction of the authority’s location.

Looking ahead, the text of the provisional agreement will undergo finalization and subsequent presentation to member states’ representatives and the European Parliament for approval. If approved, the Council and the Parliament will proceed to formally adopt the texts. It is important to note that negotiations concerning the regulation on anti-money-laundering requirements for the private sector and the directive on anti-money laundering mechanisms continue to be in progress.

This momentous development is rooted in the Commission’s comprehensive package of legislative proposals aimed at fortifying the EU’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules. The Commission’s package encompasses various regulations and directives, including the establishment of AMLA, which is envisioned to wield significant powers to impose sanctions and penalties.

The provisional agreement marks a pivotal stride in the ongoing effort to combat money laundering and terrorist financing within the EU. With the creation of AMLA, the EU is poised to bolster its regulatory framework and fortify its defenses against the multifaceted threats posed by financial crime. This achievement underscores the unwavering commitment to upholding the integrity of the EU’s financial system and upholding the principles of transparency and accountability in the realm of global finance.