In mid-2021, the European Commission revealed transformation plans within the AML/CFT arena for EU member states to be better equipped to tackle the ongoing complex financial crime challenges. Accordingly, an AML/CFT legislative package was adopted in July 2021 which included three main legislative proposals, these being:
- The establishment of the Anti-Money Laundering Authority (the “AMLA”);
- A single AML/CFT EU Rulebook, containing directly applicable rules for the private sector (the “AML Rulebook”); and
- A sixth directive on AML/CFT, mainly targeted at public entities (the “6AMLD”).
An update on the above was provided during an opening speech by Commissioner McGuinness at the European Court of Auditors’ high-level seminar, which was recently held in September 2022. In the introduction to this speech, the Commissioner highlighted that there is a common recognition across the board that the work to date on anti-money laundering has been inadequate and there is the need to up the game in the EU AML/CFT arena. Furthermore, the Commissioner declared that whilst the co-legislators are being urged to move as fast as they can, they are also being given the time to create a solid foundation to ensure that the proposals effectively tackle the issues at hand.
The focus of the speech was the AMLA, which was described as “a game-changer in the fight against money laundering” by Commissioner McGuinness. The AMLA is expected to make an important and useful contribution to preventing money laundering and terrorist financing as, whilst it will not replace national authorities, it will serve to establish a single integrated system of AML/CFT supervision across the EU, ensuring that the EU framework is applied consistently and uniformly across borders.
What is the status of the AMLA as of September 2022?
In 2021, when the above legislative package was first proposed, the plan was to have the AMLA established as of 1 January 2023 with the start of its activities as from early 2026. The current plan is now to have the AMLA launched in 2024, attain full staffing in 2025 and start direct supervision in 2026. Interinstitutional negotiations on AMLA will most probably begin at the beginning 2023. The jurisdiction which will house the seat of the new authority has not yet been decided.
The specifics of the supervisory role of the AMLA were also discussed in more detail. The AMLA will be at the core of the novel supervisory system and there will be a two-tier system in place:
- European direct supervision
- National supervision with more co-ordination at European level
European direct supervision
The AMLA will directly supervise cross border financial sector entities which are most likely exposed to money laundering, including crypto asset service providers. Discussions between the European Parliament and member states are being held to determine the conditions which will set the benchmark for entities to be directly supervised by the AMLA.
Accordingly, it is suggested that every three years, a decision will be taken as to which entities will be supervised directly by the AMLA, with the option for the AMLA to be able to take over the direct supervision of a specific entity in exceptional circumstances. Details about what the exceptional circumstances will consist of have not been mentioned.
National supervision with more co-ordination at European level
The AMLA will assist in enhancing supervision across borders, even for entities which will not fall under its direct supervision. This will entail cooperation between the AMLA and national supervisors, with the AMLA becoming the focal point which will coordinate the exchange of information and cooperation.
In addition to the above, the AMLA will also have the powers to develop the technical standards required to complete the AML Rulebook. Indeed, whilst the AML laws and regulations implemented by different member states are based on directives, which are subsequently transposed into national law, fragmentations in the system have been detected over the years. This was causing a disconnect between the different financial intelligence units across the EU, lack of common tools and resources, delays in implementation of EU laws by the EU member states and a general lack of coordination among authorities leading to several cracks in the system. With these cracks, the need for a common and harmonised structure was highly being felt.
In view of the above, the AMLA, through the AML Rulebook, shall be setting directly applicable rules, which means that the private sector will implement the same rules, no matter where they are based in the European Union. The 6AMLD then would cover the rules which legally cannot be included in a regulation and are intended for public authorities. The idea would be to leave some room for member states to decide how they wish to structure their own systems, including the functioning of national supervision and cooperation.
The Commissioner further remarked that progress for the establishment of the AMLA has so far been consistent and steady and is being closely followed by all stakeholders as the fight against money laundering remains vital. The aim is also to ensure that on a daily level, national authorities and the AMLA work hand in hand to combat money laundering.
How can PwC help?
Our Financial Crime Compliance (FCC) team can help you remain up to date with developments and be aware of forthcoming changes and more specifically how these will impact your operations.
Find out how you can adopt a proactive approach to your AML/CFT framework and manage change in a sustainable manner, by contacting us to set an appointment.
