EU Takes a Stand: Strengthening the Fight Against Money Laundering

(This article was reaffirmed on June 19, 2024, following the EU Official Journal.)

The European Parliament has recently introduced a new AML/CFT package aimed at strengthening the EU’s ability to effectively combat money laundering. These regulations represent a proactive response to the evolving challenges posed by illicit financial activities. By introducing stringent measures and enhancing oversight mechanisms, the EU aspires to establish a robust framework that safeguards the integrity and security of its financial systems.

Evolution of Anti-Money Laundering Regulations 

In response to the growing challenges of combating money laundering, the European Union has introduced a new AML/CFT package. This builds upon the foundation set by the first anti-money laundering Directive established in 1990, which aimed to prevent the misuse of the financial system for money laundering purposes. Over time, it has undergone expansions and developments, allowing Member States significant flexibility. The new AML/CFT package represents another step in this legislative progression, comprising three different components: 

• A new regulation, known as the Anti-Money Laundering Regulation (AMLR) to enhance customer due diligence requirements; 
• The sixth Anti-Money Laundering Directive (AMLD6) to modify existing parts of Directive (EU) 2015/849; 
• The European Anti-Money Laundering Authority (AMLA) for central supervision. 

These updates refine existing regulations without completely changing them. The AMLR is the first directly enforceable law, aiming to standardize anti-money laundering measures despite varying national approaches. The establishment of AMLA emphasizes unified supervision. This shift requires supervisors and legal experts to adapt to EU-level standards, potentially leading to significant changes for affected entities, requiring quick adaptation.

The EU Single Rulebook 

The EU’s Single Rulebook, also known as the AMLR, encompasses a comprehensive set of regulations aimed at harmonising anti-money laundering measures and enhancing financial transparency across the European Union. In parallel, AMLD6 addresses similar topics and intersects with the provisions outlined in the AMLR. Together, AMLD6 and AMLR will supersede AMLD4.

These new regulations include widened access to beneficial ownership information. This means that certain groups that show legitimate interest, like journalists, media professionals and authorities, can quickly access ownership information in national and EU registries. The registries will now store data from the past five years. Moreover, EU negotiators have reached an agreement to standardize the content within beneficial owner registers. These registers will reveal the natural persons or controlling legal structures and will be accessible digitally through both national central registers and an interconnected system of registers at the EU level. 

Additionally, Financial Intelligence Units (FIUs), on which both the private and public sectors rely to gather, analyse, and report financial data, will have increased powers to investigate and stop suspicious transactions. FIUs will also play a crucial role in analysing and detecting money laundering and terrorist financing cases. They will share information with other competent authorities, cooperate with entities like the Anti-Money Laundering Authority (AMLA), and conduct joint analyses for complex or cross-border cases. Notably, the two aspects – enhanced access and more power for FIUs – are also integral components of AMLD6, emphasizing the intertwined nature of AMLR and AMLD6 objectives in bolstering anti-money laundering efforts. 

One of the topics addressed in the AMLR concerns the implementation of stricter regulations specifically targeting football clubs. In recent years, football has evolved into a global industry attracting significant financial investments, some of which may have criminal ties. The FATF conducted a study on why football is appealing to criminals, given its massive global audience and economic significance. Despite its rapid growth, its regulatory framework has lagged in addressing emerging risks. The FATF report aimed to raise awareness among policymakers, law enforcement, financial institutions, and sports regulatory bodies to address these challenges in the football sector. 

Voices calling for action against illicit activities including tax evasion have resonated strongly, particularly following the outcomes of the Conference on the Future of Europe. In response to these demands, starting in 2029, top-tier professional football clubs involved in significant financial transactions will also need to verify customer identities, monitor transactions, and report any suspicious activity. 

The AMLR also includes stricter rules for individuals with substantial wealth, defined as possessing assets totalling at least EUR 50 000 000 excluding main residence. Additionally, the legislation imposes restrictions on cash payments, capping them at EUR 10 000, and implements measures aimed at preventing financial sanctions from being bypassed. 

The aforementioned measures mark a crucial stride toward fortifying the EU’s financial system. Eero Heinäluoma, the lead MEP on behalf of the Economic and Monetary Affairs Committee, underscored the significance of these measures stating: 

The result is a historic win in the fight against money laundering and terrorist financing. Until today, the member states lost billions of euros. Stricter anti-money laundering rules for cryptocurrencies, banks, trusts, oligarchs, and football were long overdue. One EU-harmonised framework will close national loopholes

A New Authority for AML/CFT

At the heart of today’s legislative package is a new authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), in line with AMLD6, that will be established in Frankfurt, Germany to directly supervise high-risk financial entities and ensure compliance with targeted financial sanctions and serve as a central coordinating body. 

The European Parliament’s resolution in September 2019 highlighted concerns over the fragmented regulatory and supervisory landscape within the AML/CFT domain, citing deficiencies in the enforcement of EU regulations and supervision. The establishment of the AMLA signifies a departure from localized supervision by providing overarching authority and jurisdiction across the European Union. While local supervisors and Financial Intelligence Units (FIUs) operate within national boundaries, the AMLA coordinates efforts and sets standards at the EU level, fostering a unified approach and amplifying the fight against money laundering and terrorist financing.

Emil Radev, a Member of the European Parliament, stressed the importance of the AMLA, stating, 

“The EP gave AMLA an important and strong role in the fight against money laundering. We hope that it will guarantee more financial security and better cooperation with national supervisors and FIUs in a cross-border environment, where risks have been growing at a constant pace. For the first time, AMLA will supervise directly the riskiest companies in the financial sector, as well as cryptocurrency providers that operate in several Member States.”

When will the new AML measures come into force? 

The new EU AML package was adopted by the European Parliament and is currently awaiting formal adoption by the Council. Once the formal adoption process is complete, the new measures will be published in the EU’s Official Journal. 

The publication in the journal is scheduled for around summer 2024, with its entry into force 20 days later. Following this: 

• The AMLA is anticipated to commence operations in Frankfurt in July 2025;
• Member states are required to transpose the provisions about beneficial ownership registries outlined in the AMLD6 by mid-2026;
• Member states are required to transpose the remaining provisions of AMLD6 by mid-2027;
• The AMLR will come into effect by mid-2027.

Get in touch 

The new EU AML/CFT package will have significant implications for member states and companies, including banks. Member states will be required to transpose the provisions of the package into their national laws, ensuring compliance with the regulations set forth. Companies, especially banks, will need to enhance their anti-money laundering and counter-terrorism financing measures to meet the stricter requirements outlined in the package. Failure to comply with the new regulations could result in penalties and reputational damage for both member states and companies.

Our consultancy services provide comprehensive support tailored to your specific needs, helping you meet the stringent requirements outlined in the package. From implementing robust customer due diligence policies and procedures to enhancing transaction monitoring systems and ensuring timely reporting of suspicious activities, we offer a range of solutions to safeguard your business. 

Contact us to stay ahead of regulatory changes and mitigate risk effectively. With our expertise and dedicated support, you can securely navigate the evolving AML landscape.