Located in Frankfurt, the new European Authority for Anti-Money laundering and Countering the Financing of Terrorism (AMLA) is due to start its first supervisory and sanctioning missions by mid-2025, except for its normative power which is applicable as of the end of this week. In this context and considering its essential role within the European Union (EU), the creation of this new authority already raises several questions, especially for stakeholders of the financial sector.
When was the AMLA established?
The AMLA was established by Regulation (EU) 2024/1620 of the European Parliament and of the Council of 31 May 2024.
This Regulation is part of a series of acts designed to strengthen the EU’s legal framework for anti-money laundering and combating the financing of terrorism (“AML-CFT”), which includes:
- Regulation (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto assets,
- Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and
- Directive (EU) 2024/1640 of the European Parliament and of the Council of 31 May 2024 on the mechanisms to be put in place by Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
The provisions of Regulation (EU) 2024/1620 creating the AMLA will become applicable from 26 June 2024. Aside from its normative power (such as drafting implementing technical standards and issuing guidelines and recommendations) which will be effective as of 26 June 2024, the AMLA’s other prerogatives and missions (including supervision and sanction) will become effective as of 1 July 2025.
Why was the AMLA established?
The implementation of AML-CFT requirements, and their transposition in each Member State’s national law, present some differences or gaps which may have been detrimental to the soundness of the internal market.
The objective of the AMLA’s establishment is therefore to create an authority tasked with contributing to the implementation of harmonized AML-CFT rules at EU level (including contributing to supervisory convergence on AML-CFT in the entire internal market and supporting the harmonization of financial intelligence units (“FIUs”)’ practices for detecting suspicious activities or financial flows).
Where will the AMLA be located?
The AMLA will have its headquarters in Frankfurt am Main, Germany.
What will be the AMLA’s missions and prerogatives towards stakeholders of the financial sector?
The AMLA will have legal personality, which will enable it to acquire, or dispose of, real estate and movable property in each EU Member State, or to bring legal action. Having legal personality will also allow it to conclude cross-border partnerships for the exchange of AML-CFT information. Moreover, the AMLA will also be able, for the purpose of its work, to conclude cooperation agreements with the OLAF (European Anti-Fraud Office), Europol, Eurojust, EPPO, AML-CFT authorities of third countries and international organizations.
The prerogatives of the AMLA will mainly be as follows:
- Following up on threats, vulnerabilities and risks linked to money-laundering activities and the financing of terrorism (“ML-FT”) at the EU level (including following up on evolutions in third countries that may have an impact in the EU).
- Analyzing the effectiveness of AML-CFT rules within the EU by regulated entities, including those of the financial sector.
- Setting up a central AML-CFT database at the EU level and keeping it updated.
- Supporting the BC-FT risk analysis and the strengthening of the cooperation and exchange of information on AML-CFT within the EU.
- Publishing works and providing training sessions on AML-CFT.
The AMLA will more specifically be in charge of exercising direct supervision over certain institutions/groups (i.e. credit/financial institutions or groups of credit/financial institutions at the highest level of consolidation in the EU[1]). To this end, the AMLA will:
- Ensure compliance by these institutions/groups of the AML-CFT requirements that apply to them.
- Performing controls and supervisory assessments of these institutions/groups to determine whether their body of procedures and internal control frameworks are satisfactory regarding their applicable obligations.
- In the event of breaches, imposing specific requirements, administrative measures, financial penalties and penalty payments based on the results of the controls and supervisory assessments.
- Participating in group-level supervision for AML-CFT, and
- Implementing a framework for the assessment of risks and vulnerabilities of these institutions/groups and keeping this system updated.
In addition to the above, the AMLA will also have a role vis-à-vis financial supervisors and national FIUs (i.e. Tracfin for France).
Regarding financial supervisors, the AMLA will specifically:
- assess, on a regular basis, these supervisors’ means, prerogatives and strategies for AML-CFT,
- provide help, when needed, to national supervisors for the supervision of institutions/groups which are not directly supervised by the AMLA, and
- settle disputes arising between financial supervisors on measures to be taken vis-à-vis a regulated entity, it being specified that the AMLA’s decision is binding.
Regarding national FIUs, the AMLA may, for example:
- follow up on changes to the FIUs’ legal framework (including their resources),
- support FIUs’ work and contribute to enhancing their cooperation and coordination,
- establish, coordinate, and facilitate the performance of joint analyses by FIUs,
- assist FIUs upon request, and
- develop tools, services, expertise and training materials and making them available to FIUs to strengthen their detection and analysis capabilities.
To carry out its missions efficiently, the AMLA will have supervisory and investigative powers and, more broadly, all powers and obligations attributed to financial supervisors in the field of AML-CFT under EU law (with certain exceptions). The AMLA will also be able to issue guidelines and recommendations, calls for action, instructions, and be able to mediate and settle disagreements between supervisors, supervisory authorities and FIUs. It will also be able to require information and documents from supervisors, supervisory authorities and FIUs.
Which texts will be the basis of the AMLA’s missions?
The AMLA will directly apply all relevant provisions of European regulations touching on AML-CFT.
Regarding EU directives on AML-CFT, the AMLA will apply each Member States’ national law transposing these directives.
What will be the AMLA’s internal governance?
The AMLA is structured in five bodies. A General Board will mainly oversee the implementation of the AML-CFT supervisory framework, of the AMLA’s missions regarding FIUs, and the AMLA’s normative power.
The Executive Board will mainly oversee the global planning and performance of the AMLA’s missions. It will also adopt the decisions which are outside of the General Board’s attributions.
Besides these collegial bodies, the AMLA will have a president in charge of representing it and with the responsibility to prepare the works of the General Board and of the Executive Board. Among these tasks, the president will set out the agendas of all meetings, convene and chair them.
To round up the presidency, an executive director will be more specifically in charge of the AMLA’s day-to-day management. As such, the executive director will implement the decisions adopted by the Executive Board, drawing up and implementing the draft single programming document, preparing the draft annual report, setting out an action plan to follow up the conclusions of internal or external audit reports and assessments, etc.
Lastly, an administrative review commission will examine any request for review of an AMLA sanction decision.
How will the AMLA carry out its supervision?
The AMLA’s AML-CFT supervision method must follow a risk-based approach. This method will be determined and updated with the national supervisory authorities on a harmonized level across the EU.
What will be included in the AMLA central database?
The database established and updated by the AMLA will include, among other elements, the following information:
- The list and information of national supervisory authorities on entities subject to AML-CFT regulation.
- Statistics on the categories and number of regulated entities and subject to supervision per category, as well as basic information on their risk profile.
- Details on administrative measures applied and financial penalties imposed during the supervision of regulated entities, in response to breaches of AML-CFT requirements (including the motivation and the nature of the breach).
- Any advice or opinion on ML-FT risks provided to other authorities and regarding authorization, withdrawal of authorization, fit-and-proper assessments for shareholders or members of management bodies of regulated entities.
- The results of the inherent and residual risk profile assessments of financial institutions subject to direct supervision from the AMLA and operating in at least six EU Member States.
- The results and reports of thematic audits and other transversal supervisory actions concerning high-risk areas or activities.
- Information on the supervisory activities performed during the year and statistical information on the staffing and resources of supervisors and supervisory authorities.
- Any data or information with relevancy for AML-CFT supervisory activities.
How will the AMLA exercise direct supervision over institutions/groups?
Joint supervisory teams will be established between the AMLA and national supervisors of the institution/group. The work of the joint supervisory team will be coordinated by an AMLA staff member.
The missions of a joint team will be to:
- Perform controls and supervisory assessments of the institution/group.
- Coordinate on-site inspections and implementing supervisory measures if necessary.
- Participate in the development of draft decisions considering reviews, assessments, and on-site inspections.
- Liaising with national financial supervisors when it is necessary for the performance of supervisory missions.
How will the AMLA’s powers to carry out its missions be manifested?
For the performance of its missions, the AMLA will have several powers, including the following:
- issuing information requests to directly supervised institutions/groups,
- conducting necessary investigations of directly supervised institutions/groups,
- conducting on-site inspections on the premises of directly supervised institutions/groups (including by obtaining judicial authorization if needed),
- applying administrative measures (recommendations, injunctions, public declarations, activity limitations or restrictions, imposing changes, suggesting authorization withdrawals or suspensions). For instance, under these measures, the AMLA may impose the strengthening of policies, procedures, and internal controls, or impose the implementation of measures to mitigate ML-FT risks,
- in the event of serious, repeated or systematic breaches of direct regulatory obligations, imposing financial penalties according to a scale mentioned in Regulation (EU) 2024/1620,
- deciding to impose penalty payments in order, for example, to force an institution/group under direct supervision, and
- publishing the administrative measures, financial penalties, and penalty payments it issues.
How will AMLA exercise indirect supervision over other institutions/groups?
Regarding institutions/groups not included in the AMLA’s direct supervision, the latter may, among other prerogatives:
- Perform periodic assessments of financial supervisors, their tools, and resources.
- Ensure that AML-CFT supervisory boards in the financial sector for the institutions/groups which have entities in other Member States are set up and function in a coherent manner.
- Invite national financial supervisors to act in exceptional circumstances in case of suspected serious, repeated, or systematic breaches (for example, if the AMLA is kept informed of the rapid deterioration of an institution/group’s compliance with its AML/CFT obligations).
- Settle cross-border disputes between financial supervisors (for example, if a financial supervisor is inactive in a way which affects the AMLA’s missions).
- Implement measures to address systematic shortcomings in supervision, especially when a financial supervisor has not applied the national law provisions transposing the directive previously mentioned.
Will the AMLA exercise normative power?
The AMLA will be in charge of drafting:
- technical texts: draft regulatory technical standards and draft implementing technical standards to be submitted to the European Commission for adoption,
- texts aiming at a common, uniform, and coherent application of EU law, such as guidelines and recommendations addressed to the national supervisory and regulatory authorities, the FIUs or the institutions/groups subject to AML-CFT requirements, and
- opinions and technical advice on all questions pertaining to its expertise, provided to the European Parliament, the Council, and the European Commission.
What financial and human means will the AMLA benefit from to perform its missions?
The AMLA will have an annual budget made up of:
- an EU contribution;
- fees paid by the institutions/groups under direct supervision or not,
- voluntary financial contributions from the Member States,
- payments from publications, trainings and other services performed by the AMLA to FIUs (financial intelligence units) and other third-country peers, and
- potential EU funding in the form of contribution agreements or ad hoc grants.
The AMLA will have its own staff, some of whom will have the status of European civil servants. It will also be able to rely on national experts on secondment or other agents who are not part of its staff, including FIU delegates.
Aside from the supervisory and regulatory authorities of the financial sector, with which other authorities will the AMLA cooperate?
To perform its missions and exercise its powers, the AMLA will need to set up and maintain close cooperation with the European supervisory authorities (ESMA, EBA and EIOPA). Such cooperation will be especially necessary when the AMLA exercises its normative power.
[1] This number of institutions/groups can be limited to 40 by the AMLA after consulting the national supervisory authorities. The first selection of these institutions will start on 1 July 2027 at the latest and will be finalized by the end of 2027. The selection will then be renewed every three years.