Europe's AML Authority Gains Supervisory Powers and Whistleblowing Mechanism

The establishment of Europe's Anti-Money Laundering Authority (AMLA) has taken a significant stride forward as European governments and the European Parliament reached a decisive agreement on the agency's scope and legal framework.

The finalized agreement outlines that AMLA will wield both direct and indirect supervisory powers over high-risk obligated entities within the financial sector. In instances of serious, systematic, or repeated breaches of applicable requirements, the authority will impose pecuniary sanctions on selected entities, as stated by the European Council.

Moreover, AMLA will ensure that banks have robust internal policies and procedures in place to implement targeted financial sanctions, asset freezes, and confiscations. The authority is granted supervisory powers over specific credit and financial institutions, including crypto asset service providers, especially those deemed high-risk or operating across borders.

The supervisory responsibilities of AMLA extend to conducting assessments and inspections through joint supervisory teams. The authority is empowered to supervise up to 40 groups and entities in its initial selection process. For non-selected entities, AML/CFT supervision will primarily remain at the national level.

In the non-financial sector, AMLA will play a supporting role, conducting reviews and investigating potential breaches of the AML/CFT framework. The authority can issue non-binding recommendations, and national supervisors may establish a voluntary college for non-financial entities operating across borders if necessary.

The agreement expands the scope of AMLA's supervisory database, requiring the establishment and maintenance of a central database containing information relevant to the AML/CFT supervisory system.

Regarding governance, AMLA will have a general board representing supervisors and Financial Intelligence Units from all member states, as well as an executive board serving as the governing body. The executive board will consist of the authority's chair and five independent full-time members, with the Commission's veto right on certain powers of the executive board removed by the Council and Parliament.

A reinforced whistleblowing mechanism is introduced, with AMLA handling reports exclusively from the financial sector. The authority can also address reports from employees of national authorities.

AMLA gains the power to settle disagreements with binding effects within financial sector colleges and, upon request, in other cases involving financial supervisors.

Negotiations are ongoing for the regulation on anti-money-laundering requirements for the private sector and the directive on anti-money laundering mechanisms. The selection process for AMLA's headquarters is under negotiation, and once agreed upon, the location will be introduced in the regulation.

The provisional agreement is set to be finalized and presented to member states' representatives and the European Parliament for approval. If approved, formal adoption by the Council and Parliament will follow. The legislative package, presented in July 2021, aims to strengthen the EU's anti-money laundering and counter-financing of terrorism rules. It includes regulations on the AMLA, transfers of funds, anti-money-laundering requirements for the private sector, and a directive on anti-money laundering mechanisms. A provisional agreement on the regulation on transfers of funds was reached on June 29, 2022.

By fLEXI tEAM