European Commission’s Q&A on the New Anti-Money Laundering Authority (AMLA)

The European Parliament and Council officially decided on February 22, 2024, to choose Frankfurt as the location of the new EU Anti-Money Laundering Authority (AMLA). On April 24, 2024, in Brussels, The European Commission released a comprehensive Q&A document regarding the establishment and functions of the new Anti-Money Laundering Authority (AMLA). Here are a few highlights of the general key points:

The Role of the new EU AML/CFT Authority (AMLA)

The AML/CFT Authority will have two main areas of activity:

• ML/CFT supervision and
• supporting EU Financial Intelligence Units (FIUs).

AMLA will become the centre of an integrated system of national AML/CFT supervisory authorities, ensuring their mutual support and cooperation. The aim is supervisory convergence and a common supervisory culture. The Authority will have a coordination and convergence role in the non-financial sector. In the financial sector, it will also directly supervise a number of selected financial sector entities that are exposed to the high risk of money laundering and terrorism financing and operate on a cross-border basis in at least six Member States.

Additionally, it will be able to take over the supervision of any obliged entity on request from the national supervisor, or on its own initiative, where there is a Union interest to do so. Concerning FIUs, the Authority will facilitate cooperation, information exchange and identification of best practices among FIUs. It will carry out these tasks by establishing standards for reporting and information exchange, by initiating or organising and supporting joint operational analyses, organising peer reviews among FIUs, and by hosting and developing the FIU.net system used both by FIUs and Europol to exchange and cross-match information. AMLA will itself be an end-user of the system and its functionalities.

AMLA Management

The Authority will have a Chair and an Executive Director. The Chair will represent the Authority and will run the two collegial governing bodies: the Executive Board, and the General Board. The Executive Director will be in charge of the day-to-day management of the Authority and will be administratively responsible for budget implementation, resources, staff and procurement.

The collaboration framework between the AMLA and the National Supervisors and FIUs

The existing national supervisors and FIUs will remain essential components of the EU’s enforcement system for AML/CFT. The EU Authority will only take over from national supervisors in overseeing a limited number of cross-border financial sector entities categorized as high-risk. As part of the new package, an integrated EU AML supervisory system will be established, closely involving both national supervisors and the EU AML Authority. While the Authority will support national FIUs in conducting joint analyses and initiating operational activities, it will not serve as an FIU itself. National FIUs will continue to be the exclusive recipients of reports on suspicious transactions and will retain responsibility for the national dissemination of analytical results from such reports.

Which entities will the AML Authority supervise directly, and how?

Directly supervised financial institutions will be determined in two ways:

• Financial sector-obliged entities that are active in at least six Member States and have a high residual risk profile in accordance with the level 2 methodology to be developed by the Authority will be selected for ongoing direct supervision by the Authority. This selection will be based on objective criteria centred on risk categorisation and cross-border activity. The list will be reviewed periodically, every three years. In order to ensure equal and fair selection, the methodology for risk categorisation of entities by national supervisors will be harmonised prior to the first selection. The first selection process based on harmonised methodology will be carried out by AMLA in 2027, with the selected entities transferred to EU-level supervision as of 2028.
• It will be possible for the Authority to request a Commission decision placing a financial sector-obliged entity under its direct supervision, irrespective of the above-mentioned criteria for a limited period of time. This can happen if there is an indication that an entity is systematically failing to meet its AML/CFT requirements and that a significant ML/TF risk may materialise, should the national supervisor be unable to take quick, effective action to deal with such risks as recommended by the Authority.
• A national supervisor may request the AML Authority to take over direct supervision of an obliged entity in exceptional circumstances with the aim of addressing at the Union level a heightened ML/TF risk or compliance failures by the obliged entity in question. The Authority will assess the existence of circumstances justifying the transfer of supervision and may agree to assume direct supervision of the obliged entity for a limited period of time.

Supervision of directly supervised obliged entities will be carried out by Joint Supervisory Teams led by staff of the AML Authority and including staff of the relevant national supervisors. This model is drawn from the working methods of the EU Single Supervisory Mechanism for prudential supervision of banks.

Will AMLA have a role in relation to sanctions implementation?

As a result of the negotiations, the Union will benefit from synergies between AML/CFT rules and our sanctions regime, making it more difficult to circumvent sanctions. This also means new powers for AMLA. As a direct supervisor, AMLA will check compliance with sanctions-related measures by the riskiest cross-border groups in the financial sector. It will also contribute to a common supervisory approach to verification of compliance with sanctions-related requirements. Finally, given its central role in the Union’s AML/CFT framework, it will be able to provide critical input to the understanding and mitigation of risks of sanctions evasion/non-implementation at the Union level.

For more detailed information please refer to the European Commission – Questions and Answers.