On 13 May 2020, the European Commission presented an action plan for a comprehensive Union policy on preventing money laundering and terrorism financing.[1] The implementation of this action plan would complement the existing European legal framework, in particular the Fifth Anti-Money Laundering Directive (AMLD), which came into force in June 2018.[2]

This action plan was adopted in response to the growing threat that money laundering and terrorism financing pose to the integrity and stability of the European economic and financial system as well as to the security of European citizens. It was also a response to the most recent European scandals in this field, in particular that surrounding money laundering practices involving several hundred billion euros by the Danish bank, Danske Bank, and its Estonian subsidiary, which alarmed European institutions and revealed the inefficiency of the European legal framework in place at the time.[3]

In this action plan, the European Commission defines six pillars that will ensure the achievement of the objectives defined, including a European Union single rule book on anti-money laundering and countering financing terrorism (hereinafter “AML-CFT”), an European Union level AML-CFT supervision, a support and cooperation mechanism for financial intelligence units (hereinafter “FIUs”) as well as the strengthening of the international dimension of the European Union AML-CFT framework.[4]

As a result, and following the favorable opinions of the European Parliament[5] and the European Council[6] issued in 2020, the European Commission adopted on 20 July 2021 a Proposal for a Regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (hereinafter the “Commission’s Proposal for a Regulation”),[7] also known as the AMLA (hereinafter the “AMLA”), which is part of a broader “legislative package” aimed at strengthening AML-CFT.[8]

On 28 March 2023, the Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees of the Parliament, voting also on other texts included in the above-mentioned “legislative package”,[9] adopted this Proposal and decided to enter into interinstitutional negotiations (trilogue between the Parliament, the Council and the Commission), a decision confirmed by plenary on 19 April 2023.

After several trilogue meetings, the Council and the Parliament reached an initial provisional agreement on the Regulation on 13 December 2023 and then adopted a final version of this provisional agreement on 12 February 2024 (hereinafter the “Council and Parliament’s Proposal for a Regulation”). This text has been presented to the representatives of the Member States and the European Parliament for approval before being definitively adopted by the Council and Parliament.[10]

It is therefore relevant to review the provisions of the Council and the Parliament’s Proposal for a Regulation establishing the AMLA as a Union body with legal personality (I) and the main missions and powers it will be entrusted with to combat money laundering and terrorism financing more effectively (II).

I. The Council and Parliament’s Proposal for a Regulation provides for the creation of an Authority for Anti-Money Laundering and Countering the Financing of Terrorism as a Union body with legal personality

Whereas the Commission’s Proposal for a Regulation specified that the AMLA should have been established from 1 January 2023,[11] the Council and the Parliament’s Proposal for a Regulation, considering the accumulated delay, simply provides that the AMLA is established by the present text.[12] It precises that the AMLA is a body of the Union with legal personality, enjoying the most extensive legal capacity accorded to legal persons under national law, and represented by its Chair.[13]

On 28 September 2023, the European Commission launched a call for applications from Member States to determine the headquarter of the AMLA, which had until 10 November 2023 to submit their applications.[14] Nine Member States answered, including France, which already hosts the Financial Action Task Force (FATF) and the European Banking Authority (EBA), and which announced as early as 6 December 2022 that it would be a candidate to host this future authority.[15] On 22 February 2024, the Council and Parliament reached an agreement considering the headquarter of the AMLA and announced that it will be based in Frankfurt and begin operations during 2025.[16]

The Council and the Parliament’s Proposal for a Regulation provides that AMLA’s revenue shall particularly consist of a contribution from the Union entered in the general budget of the European Union, of fees paid by selected and non-selected obliged entities and of any voluntary financial contribution from Member States and the European Union. It adds that AMLA’s expenditure shall include staff remuneration, administrative and infrastructure expenses and operating costs.[17] In this respect, the Council and Parliament announced that the staff would be composed of more than 400 members[18] and they detailed, in article 45 to 63 of their Proposal, the organization of the different services of the AMLA (General Board, Executive Board, Chair, Executive Director, Administrative Board of Review).

The Commission’s Proposal for a Regulation provided initially that the AMLA should have been operational by 1^st January 2024[19] and that it should have submitted, by 31 December 2029 and, in any event, every 5 years after that, its first report on its results in relation to its objectives, mandate and missions, which it should have then forwarded to the European Parliament and the European Council.[20] The Council and Parliament’s Proposal for a Regulation, readjusting the deadlines in view of the delay in setting up this new authority, now provides that it will be operational by 1^st July 2025[21]  and that it should submit its first report by 31 December 2030.[22]

The Council and the Parliament’s Proposal for a Regulation specifically states that its objective is to protect the public interest, the stability and integrity of the Union’s financial system and the good functioning of the internal market, by ensuring effective prevention of money laundering and terrorism financing in the Union, by ensuring personal high-quality supervision and by contributing to supervisory convergence throughout the internal market, as well as by contributing to the improvement of cooperation between FIUs and supervisory authorities.[23]

To achieve these objectives, the Council and Parliament’s Proposal for a Regulation entrusts the AMLA with numerous missions as well as extensive powers of control, supervision and sanction to implement these missions. This should make the AMLA a central body for AML-CFT within the Union in the coming years.

II. The Authority for Anti-Money Laundering and Countering the Financing of Terrorism should be entrusted with numerous missions and extensive powers to implement these missions in order to combat money laundering and terrorism financing more effectively within the Union

A. The AMLA should establish an integrated AML-CFT monitoring system within the Union

The Council and Parliament’s Proposal for a Regulation provides that the AMLA should develop a harmonized AML-CFT supervisory methodology on a risk-based approach, including guidelines, recommendations and other measures and instruments as appropriate. This methodology must meet high supervisory standards at Union level and be built on relevant international standards and guidance, as well as being periodically reviewed in the light of the internal market’s evolutions.[24]

It is expected that the AMLA will assist national supervisory authorities in the implementation of their supervisory mission, for example by helping to organize thematic supervisory reviews, by consolidating and sharing data between authorities and by coordinating joint reviews between several authorities,[25] by developing practical convergence tools or instruments to promote common approaches and best practices, or by providing specific assistance in response to a request from a supervisory authority.[26]

In addition, it is provided that the AMLA will maintain a central database of information submitted by supervisory authorities, such as information on the authorities themselves, statistics on obliged entities, sanctions imposed to the selected entities or reports on the outcomes of their activities, and by some financials authorities. Additionally, it is specified that it will ensure that the data is made available to supervisory authorities and some financial authorities that may need it, on a confidential basis and in accordance with a draft regulatory technical standard on the operation of this database that it will have established.[27]

B. The AMLA should conduct direct supervision of selected obliged entities from the financial sector

The Council and Parliament’s Proposal for a Regulation provides that the AMLA should conduct direct supervision of “selected obliged entities”, i.e. certain cross-border credit and financial institutions (operating in at least six Member States, including their home Member State)[28] with a high residual risk profile. The risk profile is determined following an assessment of the inherent and residual risks of these entities carried out by the AMLA on the basis of objective criteria defined in a regulatory technical standard to be submitted to the Commission no later than 1^st January 2026.[29]

This supervision consists of (i) ensuring that these entities comply with the relevant requirements imposed by European AML-CFT rules, (ii) carrying out supervisory reviews and assessments on these entities to ensure that the measures they have implemented comply with the relevant requirements as well as imposing specific requirements, administrative measures and pecuniary sanctions and (iii) developing and maintaining an up-to-date system to assess the risks and vulnerabilities of these entities to guide supervisory activities.[30]

It is expected that the supervision mission will be carried out by a joint supervisory team specific to each selected obliged entity, composed of AMLA staff and members of the financial supervisor responsible for supervision of the selected obliged entity at national level.[31]

In addition, it is provided that the Authority will have extensive supervisory powers to carry out this mission, including:

• A power to request information from (i) selected obliged entities, (ii) natural and legal persons belonging to them, (iii) third parties to whom these entities have outsourced operational functions or activities, and (iv) natural or legal persons affiliated to these third parties ;[32]
• A power to carry out on-site inspections at the business premises of the above-mentioned natural or legal persons ;[33]
• A power to carry out investigations (including hearings) over (i) selected obliged entities and (ii) any natural or legal person employed by or belonging to a selected obliged entity and established or located in a Member State ;[34]
• A power to impose administrative measures,[35] pecuniary sanctions[36] and/or periodic penalty payments[37] and a power to disclose decisions imposing such measures and sanctions.[38]

The Council and Parliament’s Proposal for a Regulation provides that the AMLA must start the first selection process by 1^st July 2027 and must complete it within six months, that it must publish the list of selected obliged entities undue delay upon completion of selection process, and that it must begin its supervision within six months of the said publication, and then renew this process every three years.[39]

C. The AMLA should conduct indirect supervision of non-selected obliged entities from the financial sector and of obliged entities from non-financial sector

The Council and Parliament’s Proposal for a Regulation provides that the AMLA should conduct indirect supervision of non-selected obliged entities (defined as opposed to selected obliged entities) by conducting periodic assessments of the financial supervisors’ activities, which are expected to personally conduct direct supervision of these entities. This assessment covers in particular the tools as well as the resources of financial supervisors and includes a review of the application of the AML-CFT supervisory methodology developed by the AMLA.[40]

It is expected that the assessments will be carried out by AMLA staff with voluntary involvement of financial supervisor staff that is not under review, and that a report will be issued setting out the results of each assessment and the specific follow-up measures (guidelines or recommendations) that it would be appropriate, proportionate and necessary for financial supervisors to adopt and for which they shall make every effort to comply with.[41]

The Council and Parliament’s Proposal for a Regulation provides that financial supervisors shall notify the AMLA with every situation regarding to compliance by non-selected obliged entities with applicable requirements related to AML/CTF, when their exposure to money laundering and terrorism financing risks deteriorates rapidly and significantly, and in particular where such deterioration may negatively impact several Member States or the Union as a whole or undermine the integrity of the Union’s financial system. In this case, the AMLA can, where it has of indications of serious, repeated or systematic breaches, request the financial supervisor to investigate, impose sanctions or adopt an individual decision requiring the entity to undertake all necessary measures to comply with its obligations.[42] Should the financial supervisor not comply with these requests or does not provide the needed information, the AMLA may request the Commission to entrust it with the mission and powers to conduct direct supervision of the obliged entity, even though it has not been selected in the first instance.[43]

Furthermore, the Council and Parliament’s Proposal for a Regulation provides that the AMLA should carry out indirect supervision of obliged entities from the non-financial sector by conducting peer reviews of the activities of non-financial supervisors and public authorities, which are expected to carry out direct supervision of these entities.[44]

In a similar way to the indirect supervision of non-selected obliged entities, it is expected that reviews will be carried out by AMLA staff with non-financial supervisors staff, and that a report will be issued setting out the follow-up measures (guidelines or recommendations) that it would be appropriate, proportionate and necessary for the non-financial supervisors to adopt and for which they must make every effort to comply with.[45]

The Council and Parliament’s Proposal for a Regulation gives the AMLA (i) the power to carry out an investigation when it has ground to suspect that a public authority overseeing a self-regulatory body or a non-financial supervisor has not applied the requirements set out by the European AML-CFT rules, after informing the latter, and (ii) the power to issue recommendations setting out the measures to be implemented to remedy the identified breaches, which may be supplemented by a warning if they are not met in one month.[46]

D. The AMLA should coordinate and support the Union’s financial intelligence units

The Council and Parliament’s Proposal for a Regulation provides that the AMLA should support and coordinate FIUs’ activities (in France, TRACFIN), for example by coordinating, organizing and facilitating joint analyses carried out by FIUs[47] in accordance with Article 25 of the proposed Sixth Anti-Money Laundering Directive,[48] by organizing training programs and personnel exchanges and secondment schemes, or by facilitating exchanges of practices and expertise between FIUs.[49]

By adopting such a Proposal for a Regulation, the European Commission is clearly demonstrating its firm commitment to AML-CFT within the Union and, given the missions and powers entrusted to the AMLA, its ambition to make it the cornerstone of the Union’s AML-CFT system.

The AMLA should therefore be in a position, together with the competent national authorities, until now the only authorities in charge of AML-CFT supervision, to remedy the weaknesses of the current framework, which does not allow for homogeneous AML-CFT supervision within the Union.[50] Indeed, it should ensure a better AML-CFT coherence through a more precise framework for all AML-CFT players within the Union, a clear definition of their roles and missions, a centralization of information and the sharing of information at European level.