Update on the EU Anti-Money Laundering Package
On 17 January 2024, the members of the European Parliament and the Council agreed on the so-called AML Regulation and the sixth AML Directive. On 13 December 2023, the negotiators of the EU legislators had already reached a broad agreement on the so-called AMLA Regulation, which establishes a new, central EU anti-money laundering authority, the Anti-Money Laundering Authority (AMLA for short). However, the location of the AMLA's headquarters is still undecided.
Here you will find a concise summary of the latest developments in Brussels regarding the EU's anti-money laundering (AML) package, with links to the final compromise texts of the AMLA Regulation, AMLR and AMLD6:
Establishment of the European Anti-Money Laundering and Terrorist Financing Authority (“AMLA Regulation”)
The creation of a new European authority to combat money laundering and terrorist financing (“Anti-Money Laundering Authority” - AMLA) is a key element of the EU anti-money laundering package.
In view of the cross-border nature of financial crime, the AMLA is intended to make the fight against money laundering and terrorist financing (AML/CFT) more efficient. This is to be achieved by means of an integrated mechanism with the national supervisory authorities in the financial sector. Specifically, the AMLA will have both direct and indirect supervisory powers over obliged entities in the financial sector, similar to the Single Supervisory Mechanism (SSM) that has been in place for 10 years for EU-wide banking supervision.
In addition, the AMLA will be able to impose fines on obliged entities for serious, systematic or repeated violations of EU-wide directly applicable AML/CFT rules to ensure compliance. The AMLA will also act as a central coordinating point for the measures of the supervisory authorities in the various EU countries to ensure the convergence of supervisory practices.
With regard to the non-financial sector, the AMLA will play a supporting role and will also coordinate the Financial Intelligence Units (FIUs) in the EU Member States.
Final compromise text
On 12 February 2024, the final compromise text of the regulation establishing the AMLA and the corresponding note confirming the final compromise text were also published. This is of course of particular importance for all those interested in compliance, as the agreed political compromises can now be specifically traced to it.
Supervisory powers of the AMLA
The provisional political agreement of 13 December 2023, gives the AMLA additional powers of direct supervision of credit and financial institutions, in particular with regard to providers of crypto-value services, provided they are high-risk or have sufficient cross-border activity. The most risky financial firms are those that operate in at least six EU Member States . In any case, at least one institution per Member State is to be directly supervised by the AMLA.
The AMLA will select the relevant institutions, which will then be monitored directly by joint supervisory teams under the direction of the AMLA with regard to compliance with AML/CFT requirements. Up to 40 companies or groups of companies are to be selected in the first selection process.
Obligors that are not selected will continue to be largely supervised by the national supervisory authorities that have been responsible for them to date.
Location of the AMLA
Nine EU Member States, in particular Austria, have applied to host the seat of the AMLA. The Commission has analyzed the applications. On 30 January 2024, the European Parliament and the Council held a joint public hearing of all applicants, which was also broadcast live. The final decision on the seat of the AMLA is to be taken by the co-legislators as part of the inter-institutional negotiations by 22 February 2024.
EU Anti-Money Laundering Regulation (“AMLR”) and Sixth EU Anti-Money Laundering Directive (“AMLD6”)
The EU Anti-Money Laundering Regulation (AML Regulation or AMLR) and the Sixth EU Anti-Money Laundering Directive (Sixth AML Directive or AMLD6), which have now been politically agreed, will form the future “Single Rulebook” for the prevention of money laundering and terrorist financing. It sets out detailed measures that companies must apply to protect the EU single market from money laundering and terrorist financing. The two laws are part of the EU anti-money laundering package proposed by the European Commission in July 2021.
These are the main points of the political agreement:
Cash limit
The point that has probably received the most media attention is the introduction of a union-wide limit for large cash payments of EUR 10,000. This cash limit should also be applicable to payment service providers and e-money providers. However, it does not apply to payments between natural persons acting in a private capacity.
Extension of the personal scope
From 2029, taking into account a generous transition period, the scope of the AMLR and AMLD6 will be extended to professional football clubs and agents.
However, Member States will be able to exempt such persons or entities from the associated obligations if they pose a low risk. This is reportedly the case for football clubs below the first division and with an annual turnover of less than EUR 5 million over two years.
Enhanced customer due diligence
The AML Regulation explicitly introduces enhanced customer due diligence requirements for cross-border correspondent relationships between providers of crypto-asset services.
Enhanced due diligence measures will also always be applicable in the future to business relationships with ultra-rich individuals and high net worth individuals. These include individuals with total assets of at least EUR 50 million. Regarding high net worth individuals, the negotiators reportedly agreed on a threshold of EUR 5 million in assets under management.
Beneficial owners
A major point of contention was the definition of beneficial ownership. In this regard, it was agreed that beneficial ownership exists when someone owns 25% or more of the shares or voting rights or other direct or indirect ownership rights in a customer, calculated at each level of the ownership chain, as well as who has control or indirect control over a company or institution.
As things stand, we assume that this will again lead to a broadening of the concept of beneficial ownership. However, the compromise text will not be published for several weeks, so there is still a degree of uncertainty here. Currently, in the case of multi-level ownership structures, it is necessary to have control from the second level onwards, which usually – but there may be exceptions – requires a stake of more than 50% in order to be considered the beneficial owner.
According to our current understanding, in the future, foreign companies based outside the EU will also have to register in the beneficial ownership register of the Member State in which they own real estate. This applies retroactively to1 January 2014, meaning that if a company owns real estate from this date, registration is necessary.
Next steps and timeline
Both the AMLA regulation, according to the political agreement on the headquarters, and the AMLR and the AMLD6 must still be formally adopted by the Council and the European Parliament. After that, the translation work and publication in the EU Official Journal will take place, presumably in the next few months.
After publication, there will be about two years before the AMLR will be (directly) applicable and the AMLD6 must be implemented by the EU Member States. By then, the AMLA must also be developed to the point where it can start its work. In addition, numerous so-called Level 2 measures of the AMLA are still to be expected, which will, above all, substantiate the AML Regulation.
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