Beating money laundering, countering terrorism financing

The Commission presented an ambitious package of legislative proposals to strengthen the EU hand

Photo: EPA Mairead McGuinness

The Commission presented on Tuesday an ambitious package of legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing (AML/CFT) rules. The package also includes the proposal for the creation of a new EU authority to fight money laundering.

This package is part of the Commission's commitment to protect EU citizens and the EU's financial system from money laundering and terrorist financing. The aim is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system.

The new measures greatly enhance the existing EU framework by taking into account new and emerging challenges linked to technological innovation. These include virtual currencies, more integrated financial flows in the Single Market and the global nature of terrorist organisations. These proposals will help to create a much more consistent framework to ease compliance for operators subject to AML/CFT rules, especially for those active cross-border.

The package consists of four legislative proposals: a Regulation establishing a new EU AML/CFT Authority; a Regulation on AML/CFT, containing directly-applicable rules, including in the areas of Customer Due Diligence and Beneficial Ownership; a sixth Directive on AML/CFT (“AMLD6”), replacing the existing Directive; and a revision of the 2015 Regulation on Transfers of Funds to trace transfers of crypto-assets.

“Money laundering poses aclear and present threat to citizens, democratic institutions, and the financial system. The scale of the problem cannot be underestimated and the loopholes that criminals can exploit need to be closed. Today's package significantly ramps up our efforts to stop dirty money being washed through the financial system. We are increasing coordination and cooperation between authorities in member states, and creating a new EU AML authority. These measures will help us protect the integrity of the financial system and the single market,” Financial Services Commissioner Mairead McGuinness said.

At the heart of the package is the creation of a new EU Authority which will transform AML/CFT supervision in the EU and enhance cooperation among Financial Intelligence Units (FIUs). The new EU-level Anti-Money Laundering Authority (AMLA) will be the central authority coordinating national authorities to ensure the private sector correctly and consistently applies EU rules. AMLA will also support FIUs to improve their analytical capacity around illicit flows and make financial intelligence a key source for law enforcement agencies.

In particular, AMLA will establish a single integrated system of AML/CFT supervision across the EU, based on common supervisory methods and convergence of high supervisory standards; 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; monitor and coordinate national supervisors responsible for other financial entities, as well as coordinate supervisors of non-financial entities; and support cooperation among national Financial Intelligence Units and facilitate coordination and joint analyses between them, to better detect illicit financial flows of a cross-border nature.

Furthermore, the Single EU Rulebook for AML/CFT will harmonise these rules across the EU, including, for example, more detailed rules on Customer Due Diligence, Beneficial Ownership and the powers and task of supervisors and Financial Intelligence Units (FIUs). Existing national registers of bank accounts will be connected, providing faster access for FIUs to information on bank accounts and safe deposit boxes. The Commission will also provide law enforcement authorities with access to this system, speeding up financial investigations and the recovery of criminal assets in cross-border cases.

As for crypto assets, at present, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. The amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.

An finally, the Commission proposed an EU-wide limit of €10,000 on large cash payments. This EU-wide limit is high enough not to put into question the euro as legal tender and recognises the vital role of cash. Limits already exist in about two-thirds of Member States, but amounts vary. National limits under €10,000 can remain in place. Limiting large cash payments makes it harder for criminals to launder dirty money. In addition, providing anonymous crypto-asset wallets will be prohibited, just as anonymous bank accounts are already prohibited by EU AML/CFT rules.

The legislative package will now be discussed by the European Parliament and Council. The Commission looks forward to a speedy legislative process. The future AML Authority should be operational in 2024 and will start its work of direct supervision slightly later, once the Directive has been transposed and the new regulatory framework starts to apply.

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