Money laundering and terrorism financing have been top priorities on the political agenda of the EU’s for several years now. As these activities not only cause immense damage to the economy and financial systems, but also pose significant threats to the safety of citizens. 

To address these issues, the European Commission introduced a package in July 2021. It contains legislative initiatives to combat money laundering and terrorism financing across Europe. Building on this proposal, the European Commission, the European Parliament and the Council of the EU, reached a preliminary agreement on the main elements in December 2023. This agreement focuses on 4 key pillars to ensure a cohesive and effective approach.

1. Creation of a new Anti-Money Laundering Authority (AMLA) 

The first and most awaited measure of the AML package is the establishment of an authority at the European level to reinforce AML/CFT supervision and support the coordination between national Financial Intelligence Units (FIUs). This is new in the sense that until now the fight against money laundering and terrorism financing was led on a national level, with discrepancies between member states in terms of efforts to achieve their goals. 

The AMLA implies an integrated mechanism with supervisory powers on national levels to ensure high risk entities of the financial sector comply with their AML/CFT obligations. More importantly, the AMLA will have the power to impose pecuniary sanctions on the obliged entities which are repeatedly in breach of applicable requirements. Some non-financial sectors will also be on the radar of the AMLA, but its power will be limited to non-binding recommendations. This centralized entity will not only have a representative role, but it is also expected to have a constraining role. Finally, a central database of information for the AML/CFT supervisory system will be established. 

2. Regulation on AML requirements for the private sector

The AML package expands the scope of obliged entities under AML regulations. Crypto-asset services providers (CASPs) will be more regulated and will have to apply the principle of identification and verification on their customers as well as reporting suspicious activity just like other traditional entities (banks, credit institutions, real estate agencies, casinos, etc.). Traders of luxury goods (precious metals, stones, jewellers, etc.) and professional football clubs and agents are joining the list too.  

Cash payments – which are under surveillance in most EU countries already – will be limited to 10.000 EUR, with the possibility to lower this threshold on a national level. The definition of beneficial ownership of legal entities is also clarified by differentiating ‘control’ and ‘ownership’, both requiring an analysis to identify the (ultimate) beneficial owners of an EU entity or a non-EU entity doing business with the EU. The threshold has been set at 25 %. Further clarifications are presented on multi-layered and complex structure to ensure that hiding behind several layers of companies will not be possible anymore. 

3. Anti-Money Laundering Directive (AMLD6)

The sixth AML directive is the third key pillar of the AML package. It replaces the AMLD5 implemented in 2018. In a report published by co-rapporteurs in May 2022, it states that the Parliament ‘regrets that EU standards have not been transposed in time by Member States nor properly applied at national level. It notes that discrepancies in the implementation of previous anti-money laundering directives have also seriously undermined the effectiveness of the framework’ (EU Parliament website). Once again, the proposal aims to avoid regulatory divergence between member States.  

The AMLD6 gives powers to national supervisors to investigate the veracity of information collected. National FIUs will be able to exchange information between them and coordinate their actions by disseminating cross-border reports; they will be granted immediate and direct access to financial, administrative, and law enforcement information (tax information, frozen funds, watercraft registers, etc.) for better efficiency. 

Identifying beneficial ownership, as already mentioned above, is an important part of due diligence requirements. Entities responsible for maintaining UBO registers (implemented during the AMLD4 and 5) will be granted power to lead investigations if they have doubts on the accuracy of the information provided. Other bodies of the civil society such as journalist or public interest organization will also be able to access these registers as part of their function. 

Finally, just as entities of the financial sector, the EU is going to conduct a risk assessment at the level to assess the risks of money laundering and terrorism financing on its territory to be able to draw recommendations to member States that will themselves conduct such a risk assessment on a national level. 

4. Regulation on transfers of funds

As already mentioned under the first point of this article, CASPs will also be impacted by the new regulations. With the rise of digital assets, a revision of the regulation to guarantee the transparency of funds is crucial.  It will be required for all the crypto-asset service providers to apply due diligence on their customers, but also to make accessible certain types of information about the originators and the beneficiaries so that the funds can finally be traceable. 

The Success of the AML Package Asks for Global Stakeholder Collaboration 

The introduction of the ” AML Package” is a pivotal moment on an international level in the fight against financial crime and the maintaining of financial integrity. Thanks to the strengthened regulatory authority and the collaboration among the involved parties, the screening and monitoring of money laundering activities will be more streamlined and effective. However, the success and effectiveness of this initiative will depend on the execution and global collaboration of all stakeholders. 

In February 2024, an agreement was found to establish the seat of the AMLA in Frankfurt, Germany by mid-2025. In the meantime, financial institutions and other non-financial entities should prepare themselves for a stricter regulatory framework and more intrusive supervision.  

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