EU AML (Anti Money Laundering) Package

The risks associated with money laundering and terrorism financing put the integrity of the EU financial system and the safety of its citizens at risk.  To date, the European Commission has issued five directives regarding AML, in an attempt to combat the money laundering and terrorist financing risks.  On 20 July 2021, the Commission announced the “Anti-money laundering and countering the financing of terrorism legislative package” – a package of legislative proposals to strengthen the EU’s rules on AML & CFT, to increase investments and ensure consumer and investor protection. 

This ambitious package contains four legislative proposals: a new EU AML Authority (AMLA) for the establishment of an EU AML authority, a new regulation on AML/CFT dealing with areas such as customer due diligence and beneficial ownership, a 6th AML Directive (AMLD 6) with rules on national supervisors and financial intelligence units in Member States and the revision of Regulation 2015/847 on Transfers of Funds expanding traceability requirements to crypto-assets.  If passed, these legislative proposals will completely change the way the EU manages the risk of money laundering.

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In more detail, the package includes the following proposals:

- proposal for a Regulation creating an EU Authority for anti-money laundering and countering the financing of terrorism (‘AMLA’); the EU will establish an EU authority that will have the competence to impose penalties and sanctions

- a proposal for a Regulation on the prevention of the use of the financial system for the purposes of money laundering (ML) and terrorist financing (AML Regulation); the new AML regulation will govern the AML obligations of obliged entities (currently regulated by the AML Directive). This means that as a regulation, it will bring a greater degree of harmonisation. Also, the AML Regulation will regulate crypto-asset service providers in a more expansive way that will be consistent with Markets in Crypto-Assets regulation (MiCAR).

- proposal for a 6th AML Directive (AMLD6) establishing the mechanisms that Member States should put in place to prevent the use of the financial system for ML/TF purposes, and repealing Directive (EU) 2015/849(AMLD5); the directive will regulate the powers and responsibilities of supervisors and the introduction of a common risk-categorisation tool for the harmonised application of risk-based supervision

- proposal for the recast of Regulation (EU) 2015/847 expanding traceability requirements to crypto-assets (TFR) [travel rule regulation]. The wire transfer rule in the payment industry will apply by EU law to crypto asset transfers.

The EU keeps up its fight to safeguard its financial system and its citizens from money laundering and terrorism financing. On 7 December 2022, the European Council has agreed its position on a strengthened rulebook in order to broaden the scope of the current regulatory framework, apply stricter rules in all EU member states, and close any potential gaps.  In particular, it has agreed on an anti-money laundering (AML) regulation and a new directive (AMLD6).  These two proposals and the proposal for a revision of the transfer of funds regulation, on which an understanding has already been reached with the European Parliament, will make up the new EU AML rulebook.  The proposed AML rulebook intends to provide a uniform AML/CFT framework for the European Union in order to make compliance for subject persons who are subject to AML/CFT rules and supervision, particularly those who engage in cross-border business, easier.

The Council is now in a position to start negotiations with the European Parliament in order to eventually come to an agreement and adopt the final version of the legislative texts.  Following that, the actions will be included in the “AML rulebook” together with a regulation on information accompanying transfers of funds and certain crypto assets.  

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    - 02/06/2023 - AML5, eIDAS and Blockchain: Transforming the Financial Services Industry

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    - 30/06/2023 - Fintech Regulation and Policy

The key legislative changes proposed by the Council include the following:

1. Extending the AML rulebook’s application to include the entire cryptocurrency sector. This means that crypto-asset service providers (CASPs) will be required to apply due diligence measures on their customers when carrying out transactions amounting to €1,000 or more.

2. Third-party financing intermediaries, persons trading in precious metals, precious stones, and cultural goods as well as jewellers, horologists, and goldsmiths will also be subject to the regulation. Also, cash payments are restricted to a maximum of €10.000 across the entire EU.  Member States will have the option to set a lower maximum limit if they want so.

3. Third countries identified by the Financial Action Task Force (FATF) as High-Risk will also be listed by the EU into the corresponding EU lists, i.e the “blacklist” and the “grey list.”

4. The council had decided to further harmonize and increase the transparency of the beneficial ownership rules. Clarifications are also made regarding related rules applicable to multi-layered ownership and control structures.

5. Member states should make sure that any natural or legal person that can demonstrate a legitimate interest have access to information held in the beneficial ownership registers, and such persons should include those journalists and civil society organisations that are linked to the prevention and combatting of money laundering and terrorist financing.

6. The package of rules calls for improved intergovernmental coordination as swell as the clarification of outsourcing provisions, supervisory powers and a minimum set of information to which all financial intelligence units should have access.

In light of this,the aforementioned proposed changes are not yet final, and may be subject to further changes, however, subject persons are recommended to keep track of any new developments in the negotiation process and become familiar with the suggested changes as necessary.  Following approval during a plenary session in April 2023, the European Parliament would be ready to start discussions on the AML/CFT package.