Financial Institutions to Fund Europe’s New AML Authority

By Koos Couvée

Funding for a planned EU anti-money laundering watchdog will primarily come from levies on financial institutions and enable the bloc-wide body to carry out both supervisory and financial intelligence functions by 2026, a senior official said Monday.

The European Commission, the EU’s executive branch, will unveil a wide-ranging “AML Action Plan” in July to address a range of vulnerabilities to financial crime, including by harmonizing AML rules across member states and bolstering information-sharing among national financial intelligence units, or FIUs, EU finance chief Mairead McGuinness said.

The creation of a single, bloc-wide AML body represents the reforms’ “flagship” component and will play a key role in the implementation of several aspects of the six-pillar action plan, according to McGuinness, who serves as EU Commissioner for Financial Stability, Financial Services and the Capital Markets Union.

“The authority will combine supervisory and FIU coordination tasks all under the one roof,” she told the audience of a virtual event hosted by AML Intelligence, a business intelligence firm in Dublin, Ireland. “That will help us get a better understanding of the risks facing the European Union … and the measures taken to address those risks.”

The new body will directly supervise certain high-risk financial firms that have international operations, McGuinness noted, without clarifying exactly what kind and how many entities may be subject to the change.

It will also oversee the work of national AML regulators of banks, money services businesses and other financial institutions, as well as of non-financial firms, such as corporate services providers, accountants, and lawyers.

“In this we want to learn from the experience of the Single Supervisory Mechanism, which supervises large EU banks [for the purposes of ensuring financial stability],” McGuiness said. “Direct supervision should be carried out via joint supervisory teams … which will also help bring together the authority and national supervisors.”

The bloc-wide body will additionally house a mechanism geared towards supporting and improving coordination of the bloc’s 27 FIUs to ensure that financial intelligence can flow more freely across borders and investigators can identify transnational laundering schemes more promptly and easily.

To avoid imposing any additional, “excessive” burden on the EU budget, funding for the body will largely come from fees imposed on entities subject to financial crime-compliance obligations, McGuinness said.

The EU official did not explain how exactly the fees would be collected but pledged that they would be “both reasonable and manageable.”

The body will be charged with developing and issuing guidance pertaining to a planned regulation aimed at smoothing out differences in how member states have implemented and currently apply EU rules around customer due diligence, beneficial ownership and other key aspects of the AML framework.

That regulation, first proposed in May 2020, will be directly applicable throughout the bloc, but the EU has not spelled out when it may take effect.

The body will moreover have a role in advising the Commission on AML risks originating outside the EU, the finance chief said, suggesting it may support EU efforts to blacklist non-EU jurisdictions perceived to have weak controls against illicit finance.

The authority will begin work in 2024, achieve full staffing levels the following year and start directly supervising national AML agencies and the high-risk, cross-border firms in 2026, McGuiness said.

Wim Mijs, chief executive of the European Banking Federation, urged the EU during the same virtual event to ensure that the new watchdog is staffed by “supranational specialists” drawn from law enforcement agencies and financial institutions, and empowered with “effective legal basis” to host the successor of, the outdated EU system for sharing intelligence among FIUs.

“It’s essential in my view that this new AML authority is able to [gain sight of] the full picture,” Mijs, said Monday. “They should … focus on the big networks, the big transactions, the big money streams, because if you disrupt these, then you’re fighting organized crime for real.”

The AML action plan slated for publication in July will also include a requirement for all types of cryptocurrency providers to comply with AML rules as part of efforts to bring EU regulations in line with the latest standards promulgated by the Financial Action Task Force, McGuinness separately said.

The EU’s Fifth Anti-Money Laundering Directive only applied to cryptocurrency exchanges and custodian wallet providers when it took effect in January 2020.

The reforms will also introduce a €10,000 limit on cash payments, McGuinness said, adding that the limit would not impact lower thresholds that a number of member states, including Greece and France, have already put in place.

“A 10,000 euro limit is high enough not to put into question the euro as legal tender nor to affect financial inclusion,” she said. “We respect the vital role of cash, but … this limit is low enough to make it harder for criminals to launder large sums of money.”

Contact Koos Couvée at

Topics : Anti-money laundering , Counterterrorist Financing
Source: European Union
Document Date: May 17, 2021