EU's AMLA to Regulate Largest Financial Institutions Across Multiple Member States

The establishment of the EU’s Anti-Money Laundering Authority (AMLA) marks a significant shift in the world of anti-money laundering (AML). One pressing question for financial institutions has been which entities will fall under AMLA’s regulation. Laws published today by the EU in its official journal provide clarity on this issue.

AMLA will oversee credit and financial institutions operating in “at least six” EU member states, meaning only the largest financial organizations in the bloc will be directly supervised by AMLA. The EU explained that AMLA oversight would “bring significant added value compared to fragmented supervision between home and host Member States,” eliminating the need for coordination between national supervisors of home and host Member States.

By taking a unified approach, AMLA will assign a “single group-wide risk score” to entities, rather than separate scores for different country operations. This means that a bank’s operations in Germany and Spain will be evaluated together under one risk assessment.

AMLA will have the capacity to “simultaneously supervise up to 40 groups and entities.” If more than 40 entities meet the criteria for AMLA oversight, the regulator will select the 40 organizations operating “in the highest number of member states.” Should entities 39, 40, and 41 operate in the same number of member states, the decision will then be based on the “highest ratio of volume of transactions with third countries to their total volume of transactions.”

In cases where a tiebreak is still needed, AMLA has the flexibility to supervise more than 40 entities, depending on its capacity to allocate or hire additional staff. The EU also plans to supervise “at least one entity per Member State,” applying a risk-based approach in member states where no entities are identified through the regular selection process.

After commencing the selection process, AMLA will publish a list of selected entities “within six months.” Entities chosen for AMLA oversight will remain under its supervision “for at least three years,” even if they no longer meet some of the supervisory requirements during this period. The determination of an organization’s risk profile will rely on data from national regulators for new selections, and on data held by AMLA for already selected entities.

For entities no longer meeting AMLA oversight criteria after the three-year period, the regulator will ensure a smooth transition back to national supervision. The EU stated that “each subsequent selection should commence 12 months before the expiry of the three-year period of supervision of the previously selected obliged entities,” ensuring sufficient time for this transition.

The AMLA’s regulatory reach will bring a more cohesive and comprehensive approach to AML oversight across the EU’s largest financial institutions, aiming to enhance the effectiveness and consistency of anti-money laundering efforts throughout the region.

By fLEXI tEAM