The EU construction of corruption deconstruction: Anti-Money laundering authority (AMLA)

By Katarina Stanojevic


The proposal made on July 20, 2021 by the European Commission to establish the European Union Anti-Money Laundering Authority (AMLA) marks a crucial stride in addressing the escalating threats of money laundering and terrorism financing in Europe. This initiative is a top priority for the European Union (EU) in combating organized and serious international crime. AMLA is a pivotal component of the comprehensive action plan introduced in 2020 to curb these criminal activities. By introducing EU-level supervision and offering support to national supervisors in the realm of anti-money laundering and countering the financing of terrorism (AML/CFT), as well as to financial intelligence units (FIUs) in EU member states, AMLA aims to establish an integrated system fostering cooperation and coordination among member states. This collaborative approach seeks to impede criminals from laundering illicit funds in the EU, addressing the current alarming situation where a substantial portion of estimated criminal profits remains unconfiscated and accessible to criminals.

With a partial political agreement reached between the Council and the European Parliament on the proposal in June 2022, highlighting the urgency and significance of the initiative, the establishment of AMLA remains on track. It is anticipated that the new authority will be operational in 2026, ushering in a new era in AML/CFT. AMLA is set to provide a comprehensive framework for EU-level AML/CFT supervision and cooperation among FIUs, ensuring high standards of independence and accountability. These developments are poised to significantly enhance the EU's capacity to combat money laundering and terrorism financing. Given these critical advancements, it is pertinent to explore the rationale behind this initiative, the key objectives, rules, principles of AMLA, and the challenges and opportunities that will arise as AMLA becomes operational.

AMLA's primary objective is to introduce EU-level supervision, providing support to national supervisors in the critical domains of anti-money laundering and countering the financing of terrorism (AML/CFT). By doing so, it aims to create a unified and robust system that hampers criminals from exploiting the European Union's financial landscape.

The governance structure of AMLA is designed with two key boards: the General Board and the Executive Board. The General Board, comprising representatives from all member states, plays a central role in decision-making regarding delegated acts, guidelines, and measures for both obliged entities and financial intelligence units (FIUs). On the other hand, the Executive Board, led by the Chair of the authority and five independent full-time members, oversees the day-to-day management of AMLA. This includes decisions on individual obliged entities or supervisory authorities, budgetary matters, and procurement.

AMLA's scope extends beyond traditional financial institutions, as it aims to directly supervise high-risk entities in the financial sector. This coverage includes crypto-asset service providers that meet specific criteria. The authority's mission is to strengthen cooperation and coordination among member states, leading to a more integrated and secure system against financial crime.

Despite the inherent challenges, such as securing funding, ensuring functional autonomy, and fostering cooperation with national authorities, the advantages of establishing AMLA are significant. The authority is anticipated to enhance cooperation among EU member states, fortify the EU's reputation as a secure business environment, and actively contribute to shaping relevant policymaking.

The structural components of AMLA include joint supervisory teams for selected obliged entities, with AMLA taking the lead in these teams. Additionally, the authority will conduct peer reviews, investigate breaches, and possess the power to adopt binding decisions and administrative sanctions. AMLA's role extends to supporting and coordinating Financial Intelligence Units (FIUs), fostering collaboration, conducting joint analyses, and ensuring the efficiency of the platform.

AMLA is positioned to unlock its full potential by maintaining the AML/CFT database, conducting periodic reviews, and promoting supervisory convergence. Its success hinges on achieving adequate budgetary and functional autonomy, including the authority's power to levy fees on obligated entities. Independence, accountability, and collaboration with both EU and national authorities are paramount to ensuring AMLA's effectiveness and transparent operation.

Before the 22th of February, the provision specifying AMLA's location was left vacant. Functioning as a decentralized EU regulatory agency, AMLA's designated seat will be in Frankfurt. Traditionally, Member States have determined the locations of decentralized agencies, employing varying procedures over time. However, the European Court of Justice (ECJ) judgments on July 14, 2022, clarified that the authority to decide an EU agency's seat location, as per Article 341 TFEU, rests with the EU legislature, not the Member States. AMLA is the inaugural case applying this legal precedent. Following the co-legislators' agreement on seat selection criteria and practicalities for applications, a joint call for applications commenced on September 28, 2023. Member States had until November 10, 2023, to submit applications, which were then made accessible on a Commission-hosted website.

Nine cities were in contention: Paris, Brussels, Frankfurt, Dublin, Madrid, Rome, Riga, Vilnius, and Vienna. Each of them hoped to host the executives of AMLA and reap the economic benefits and prestige associated with hosting such an organization. As is customary for all EU agencies, the selection of the headquarters led to discussions among member countries within the Council. The Commission conducted an unbiased and factual evaluation of these applications, sharing the assessment with co-legislators on January 10, 2024, and publishing it on their website. On January 30, 2024, joint public hearings involving all AMLA hosting applicants occurred in the European Parliament. Co-legislators aimed to reach a consensus on AMLA's location through an informal inter-institutional meeting on February 22, 2024. During this joint vote, each co-legislator had an equal number of votes, leading to the selection of Frankfurt as AMLA's seat. The legislative text will formally incorporate this decision through the ordinary legislative procedure.

Moreover, to identify and address risks affecting the EU internal market, the European Commission conducts risk assessments. The EU has enacted robust legislation to combat money laundering and terrorist financing, with the initial anti-money laundering Directive dating back to 1990. This directive mandates that obligated entities undertake customer due diligence, encompassing the identification and verification of client identities, transaction monitoring, and the reporting of suspicious transactions upon entering into a business relationship. Over time, EU laws have undergone consistent revisions to address evolving risks associated with money laundering and terrorist financing. The legislative framework not only spans various risk-prone domains, such as virtual assets and crowdfunding, but also complements other regulations like the Markets in Crypto-Assets Regulation. The newly introduced Regulation on the Traceability of Transfers of Funds (TFR) enhances the traceability of crypto-asset transfers and user authentication, aligning with Financial Action Task Force (FATF) standards. This regulation is slated to come into effect in December 2024. To ensure the effective implementation of this legislation, the Commission reviews the transposition of EU law and collaborates with competent authorities, underscoring its commitment to combating money laundering and terrorist financing.

The FATF provides a list of nations representing a significant risk for money laundering and terrorist financing on a global scale. It urges nations to exercise increased vigilance in their interactions with countries identified as having strategic deficiencies in AML, CFT, or engaging in the proliferation of weapons of mass destruction. The FATF categorizes these nations into two groups: those subject to a call for action (blacklist) such as Myanmar, North Korea, and Iran, and jurisdictions under heightened monitoring (greylist), which include Bulgaria, Burkina Faso, Cameroon, Croatia, Democratic Republic of Congo, Haiti, Jamaica, Kenya, Mali, Mozambique, Namibia, Nigeria, Philippines, Senegal, South Africa, South Sudan, Syria, Tanzania, Turkey, Vietnam, and Yemen.

Additionally, under the authority granted by Article 9 of Directive 2015/849, the European Commission identifies third countries with strategic deficiencies in their AML and CFT regulations. The resulting EU list is distinct from the FATF list and comprises countries such as Afghanistan, Barbados, Iran, Nigeria, North Korea, Panama, Syria, Uganda, Yemen, among others. Importantly, this EU list includes third countries and excludes any EU member states.

In summary, the establishment of AMLA signifies a substantial leap forward in strengthening AML/CFT efforts within the European Union. The authority's comprehensive framework, supervisory powers, and coordination mechanisms position it as a pivotal player in the fight against money laundering and terrorism financing. Addressing challenges and seizing opportunities will be vital to ensuring AMLA's success in achieving its objectives and fortifying the EU's financial integrity.



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