The EU’s European Commission (EC) is readying plans to create a new anti-money laundering agency to oversee AML/CFT efforts across the EU, according to recent reports. If created, this agency would replace the current dedicated unit established within the European Banking Authority (EBA) and expand the EU’s regulatory powers.
Additional details are slated to be released on July 20, but the EC is expected to recommend that the new Anti-Money Laundering Authority (AMLA) be empowered to directly supervise both national regulators and financial companies within the EU. With respect to the latter, the primary focus would be on scrutinizing companies that are more exposed to cross-border transactions and high-risk entities and individuals. Moreover, the new AMLA would be authorized to impose fines directly on financial institutions that demonstrate AML/CFT compliance gaps and failures.
Finally, the agency would be independently run. That is, the new AMLA’s board would not consist of representatives from EU member states, which is a departure from the current setup at the EBA. This will help guard against attempts by member states to influence money laundering investigations and perhaps receive more lenient punishments (if any at all) — a practice that came to light amid investigations into the recent Danske Bank scandal.
The EC has also proposed creating a master, EU-wide rulebook, that member states and the financial institutions that operate within them would be obliged to follow — which would include new rules for cryptocurrencies and other virtual assets. These rules would go hand in hand with an initiative to improve coordination among national financial intelligence units across the bloc. The hope is that these two proposals, plus the creation of the new AMLA, will help address the inconsistent implementation and enforcement of the EU’s current anti-money laundering directives and further harmonize member states’ regulatory approaches to AML/CFT.
The proposals still have to overcome hurdles: the European Parliament and member states will need to approve the EC’s proposals. Passage, therefore, isn’t guaranteed, especially since many member states will likely raise objections to greater oversight and express concerns over a loss of national sovereignty.
However, calls for a more centralized, streamlined approach to AML/CFT measures have increased in recent years and gained support among lawmakers amid a series of high-profile scandals involving several major banks throughout Europe. Indeed, many point to the AML/CFT failures at Danske Bank, which reportedly enabled over $200 billion of illicit funds to flow through its Estonian branch between 2007 and 2015, as one of the primary drivers for the current proposals. Other scandals involving Deutsche Bank, ING and Swedbank have no doubt also contributed to the EU’s determination to take a tougher stance on AML/CFT compliance.
If approved, the AMLA would begin operating in 2024 and assume its regulatory responsibilities in 2026.