The Idea

Over the past decade, we saw the European lawmakers becoming more and more diligent in matters related to money laundering and terrorism financing.

The existing deficiencies in the implementation of AML/CFT measures and even the questioning of the effectiveness of the current rules became gradually a top priority for the European Commission.

The collective efforts around the Union lead us to the establishment of a new authority, vested with the responsibility not only to directly or indirectly supervise the most high-risk institutions, but also to develop such technical standards to specify the details of the new unified AML/CFT Rulebook. The said authority is the Anti-Money Laundering Authority (‘AMLA’).

Supervision

Despite the fact that AMLA is not a Financial Intelligence Unit as such, it is entrusted with two main tasks: a) the AML/CFT supervision and b) provision of support to Member State Financial Intelligence Units.

Direct supervision will be limited to selected entities in the financial sector which deemed to pose higher risk of money laundering. In addition, AMLA will be in close communication and collaboration with the national AML authorities to exercise such direct supervision.

Indirectly, AMLA will coordinate supervision of other financial entities in a national level where will also have the power to issue binding statements in cases of disagreement between national authorities.

Additional coordination role will also be exercised by AMLA when it comes to national Financial Intelligence Units.

In respect to the support function, the new Authority will facilitate identification of best practices among National Financial Intelligence Units, as well as promotion of co-operation and exchange of information.

AMLA’s involvement in non- financial industry

The supervision of the new Authority will not be limited to the financial sector and is expected to expand in other non-financial entities within the Union.

Even though the supervisory powers will be limited, AMLA will be empowered to carry out periodical peer reviews and to investigate possible breaches or incorrect application of AML/CFT requirements by supervisors in the non-financial sector. Where breach insists, AMLA will be entitled to issue warnings to the relevant authorities. Such warnings should not be taken lightly by the recipients.

AMLA will also be vested with the role of the mediator since, it will be allowed to settle differences between non-financial supervisors regarding measures against an obliged entity in the non-financial industry. In this case, AMLA’s powers will be limited to issue opinion which is by nature a non-binding decision.

Dates to remember

• 20 July 2021: The European Commission presents the package of legislative proposals to strengthen the Union’s AML/CFT rules.
• 30 May 2024: Adoption of the AMLA Regulation by the European Council, as part of the AML/CFT package rules
• 26 June 2024: AMLA is legally established
• Summer 2025: AMLA commences operations
• During 2027: 40 obliged entities selected to be directly supervised by AMLA
• January 2028: commencement of direct supervision and AMLA is fully operational.

How AMLA will affect the obliged entities

Even though direct supervision will only commence in 2028 and only a handful of entities will be directly governed by AMLA, it is important to note that the Authority will proceed with significant actions and collaboration with national authorities for the purpose of setting up the technical standards for a unified rulebook.

As such, indirectly, banks and other financial institutions are expected to be affected and will be asked to follow stricter regulations and comply with higher AML standards. The above compliance will come at a cost, either we refer to manpower or tailormade and sophisticated compliance policies and software.

In conclusion

The need for robust AML measures is predominant not only on a national level but also at a Union’s level. The establishment of AMLA, arguably delayed, was a necessity however it remains to be seen how the supervised entities will receive the new set of rules and an additional supervisory authority and in the end how the banking and financial market will respond to the new regulatory environment.

For all enquiries related to AMLA, please contact our team of experts at agp@agplaw.com  to learn more.

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