A new package of legislative proposals to combat money laundering and counter the financing of terrorism has been put forward by the European Commission, on 20 July, for discussion by the European Parliament and Council.
Described as a ‘game changer’ by the Commissioner for Financial Services, Financial Stability and the Capital Markets Union, Mairead McGuinness, it will improve the detection of suspicious transactions and activities, and close loopholes used to launder illicit proceeds or finance terrorist activities through the financial system. The package addresses new and emerging challenges linked to technological innovation, including virtual currencies, more integrated financial flows in the Single Market and the global nature of terrorist organisations. It will also help to create a more consistent framework to ease compliance for operators subject to AML/CFT rules, especially for those active cross-border.
Four key tools
The proposal includes the following four key tools to allow the EU to keep pace with a fast-moving and complex international environment with rapidly evolving risks.
1) Creation of a new EU AML Authority (AMLA)
As a central EU AML authority, AMLA will transform the EU’s AML/CFT supervision and enhance cooperation and joint analyses among Financial Intelligence Units (FIUs), supporting them to improve their analytical and detection capacity around illicit flows, particularly cross-border, and make financial intelligence a key source for law enforcement agencies.
AMLA will coordinate national authorities to ensure the private sector applies EU rules correctly and consistently, and will monitor and coordinate national supervisors responsible for other financial entities, as well as coordinate supervisors of non-financial entities.
AMLA will also directly supervise some of the riskiest financial institutions that operate in a large number of Member States or require immediate action to address imminent risks.
AMLA will be able to issue binding decisions for entities to take specific actions/conduct and may impose sanctions for breaches of AML requirements. It may also take over the supervision of any entity that poses risks that failed to be addressed.
2) A single EU Rulebook
This is a unified AML/CFT regulatory framework which includes directly applicable AML/CFT rules and requirements on obliged entities (currently, almost all financial institutions are obliged entities).
The Rulebook will harmonise AML/CFT rules across the EU. It will connect existing national registers of bank accounts in order to provide faster access to information for FIUs. The Commission will provide law enforcement authorities with access to this system in order to speed up financial investigations and the recovery of criminal assets in cross border contexts. Such access will be subject to robust safeguards.
3) €10,000 EU-wide limit on large cash payments
An EU-wide threshold for cash payments is proposed, as inconsistent thresholds exist in approximately a third of EU Member States, with none in the rest. This represents an upper limit: Member States with lower thresholds can maintain them.
4) Full application of EU AML/CFT rules to the crypto sector
Currently, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. This proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. These amendments will ensure full traceability of crypto-asset transfers, including by prohibiting anonymous crypto asset wallets, and will allow for prevention and detection of their possible use for money laundering or terrorism financing.
Beyond EU borders
The Commission works closely with international partners to combat the circulation of illicit money around the globe, including the Financial Action Task Force (FATF) – the global money laundering and terrorist financing watchdog – which issues recommendations to countries. Countries listed by the FATF as ‘grey listed’ (whereby “the country has committed to resolve the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring”) or ‘black listed’ (non-cooperative countries) will similarly be listed by the EU, which will then apply measures according to the risks posed. The EU’s list will also include countries which pose a threat to the EU's financial system based on an independent assessment.