27 July 2021 Katrien Baetens BusinessCrimeLinks

New rules proposed to tackle financial crime in the EU: is the European game now over for money launderers?

The European Commission (“Commission”) has been looking to strengthen European anti-money laundering and counter-terrorism financing (“AML/CTF”) enforcement for many years. It has now proposed four specific measures in an ambitious programme of reform.

The package encompasses:

  • The creation of an EU Anti-Money Laundering Authority

As anticipated, the Commission is looking to establish a new EU Anti-Money Laundering Authority (“AMLA”), which  will be the centrepiece in its enhanced battle against money laundering and terrorist financing.

The AMLA will have the power to impose regulatory technical standards and guidelines. It may also enforce binding decisions, administrative measures and pecuniary sanctions towards directly supervised obliged entities, as discussed below.

The tasks of the AMLA can be divided into the following areas:

  • It will act as the direct supervisor of a limited number of the riskiest cross-border financial sector obliged entities. In addition, in emergency circumstances, it will have the power to take over the supervision of any financial sector obliged entity from a national supervisory authority,  if there are indications of breaches of AML/CFT legislation which are not being efficiently and adequately dealt with by that supervisory authority;
  • The AMLA shall carry out periodic reviews to ensure that all financial supervisors have the resources and powers that are necessary for the performance of their tasks.
  • With respect to non-financial supervisors, including self-regulatory bodies where appropriate, the AMLA shall coordinate peer reviews of supervisory standards and practices. It will be able to request non-financial supervisors to investigate possible breaches of the requirements applicable to obliged entities and to consider imposing sanctions or remedial actions in respect of such breaches.
  • The AMLA will assist domestic Financial Intelligence Units (“FIUs”) and play a significant role in the conduct of joint analyses by FIUs across the EU.
  • A regulation on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing 

A second strand of the Commission’s proposals would promote the harmonisation of AML/CFT rules across the EU and bolster the ability of FIUs to enforce those rules, by:

  • introducing more detailed rules on customer due diligence, beneficial ownership and the powers and tasks of supervisors and FIUs; and
  • connecting national registers of bank accounts, which may be accessed by FIUs and law enforcement authorities.

The Commission has proposed an EU-wide limit of €10,000 on payments that can be made in cash, although national limits of under €10,000 will still be permissible.

In addition, the provision of anonymous crypto-asset wallets will be prohibited.

  • AML/FCT rules to apply to crypto assets

Until now, transfers of virtual assets have remained outside of the ambit of EU legislation on financial services, with the scope of the 2015 Regulation on the Transfer of Funds being limited to the transfer of “banknotes and coins, scriptural money and electronic money”. The recast of the 2015 Regulation will extend the information requirements currently applying to wire transfers to crypto assets, and VASPs (Virtual Asset Service Providers) will be obliged to collect and make accessible data concerning the originators and beneficiaries of the transfers of the virtual or crypto assets they operate.

  • The 6th AML Directive (“6AMLD”)

6AMLD will further harmonise AML rules to tackle the lack of a consistent approach to the supervision of obliged entities, with divergent outcomes for operators providing services across the internal market. As such, a number of changes of substance are proposed, which will bring about a greater level of convergence in the practices of supervisors and FIUs and in relation to cooperation among competent authorities.

Next steps

Although the Commission is “hopeful for a speedy legislative process”, this new package is not likely to enter into force before 2024. It will first have to be discussed by the European Parliament and the Council and a final legislative text agreed. In addition, the proposed Directive will need to be transposed on a national level.

However, the Commission will be hoping that the introduction of these reforms across the EU will have a significant impact in its fight against money laundering and terrorist financing, result in better harmonisation and cooperation between member states and assist with the fight against financial crime across the union. While the game may not yet be completely over for money launderers and terrorist financiers, it’s certainly about to get a whole lot tougher.

You can read about the proposals in more detail in our client publication, here.