By Thekla Nikolaou
Manager, Compliance Support Department
On June 19, 2024, the European Union officially published a groundbreaking package of rules, marking a significant milestone in its fight against money laundering and the financing of terrorism. This comprehensive regulatory framework aims to enhance the effectiveness and consistency of anti-money laundering (AML) and counter-terrorism financing (CFT) measures across all Member States. More specifically, these new rules highlight the EU’s commitment to strengthening its financial regulatory landscape and ensuring robust protection against illicit financial activities.
Key Components of the AML/CFT Package
The new AML/CFT package consists of three primary elements:
- The Sixth Anti-Money Laundering Directive (MLD6)
- The EU “Single Rulebook” Regulation (AML Regulation)
- The Anti-Money Laundering Authority Regulation (AMLAR)
These components are designed to address and rectify the fragmented approach that has historically been a challenge due to the varied implementation of AML Directives by different Member States. The new regulations aim to centralise supervision and create a more consistent and cohesive regulatory environment across the EU.
Below we summarise the main points for each of these new elements:
- The Sixth Anti-Money Laundering Directive (MLD6)
- Enhanced Transparency and Accountability: Strengthens the transparency of financial transactions and improves the accountability of financial institutions. By ensuring that all transactions are traceable and verifiable, the proposal aims to close loopholes that could be exploited by criminals.
- Risk-Based Approach: Implements a risk-based approach tailored to different sectors and types of transactions. This approach acknowledges that not all sectors face the same level of risk and allows resources to be allocated where they are most needed.
- Technological Innovation: Embraces technological advancements such as digital identities and blockchain technology. These innovations offer new tools for verifying identities and tracking transactions in real-time, making it harder for illicit funds to remain hidden.
- International Cooperation: Deepens collaboration between EU Member States to more effectively tackle the cross-border nature of money laundering and terrorist financing.
- The EU “Single Rulebook” Regulation (AML Regulation)
- Unified Regulatory Framework: Aims to establish a single EU rulebook for AML and CTF to help eliminate loopholes and ensure that all financial institutions within the EU adhere to the same stringent standards.
- Enhanced Supervision and Cooperation: Includes provisions for EU-level supervision of AML/CFT activities, promoting better coordination and information exchange between member states, for example, greater cooperation between Financial Intelligence Units (FIUs).
- Focus on High-Risk Areas: Adopts specific measures to address higher-risk sectors and entities, ensuring that due diligence is appropriately scaled according to the level of risk involved.
- Incorporation of New Technologies: Expands the scope of existing AML/CFT frameworks to include emerging technologies and financial products such as crypto-assets.
- The Anti-Money Laundering Authority Regulation (AMLAR)
- Central Coordination: The Anti-Money Laundering Authority (AMLA), to be based in Frankfurt, will serve as the central authority coordinating national supervisors, ensuring uniform application of EU rules and preventing regulatory arbitrage.
- Direct Supervision: AMLA will have direct supervisory powers over high-risk financial institutions and groups, enhancing the ability to detect and mitigate risks efficiently.
- Enhanced Cooperation: AMLA will foster greater collaboration among FIUs, enabling more effective cross-border investigations and information exchange.
Implications for Financial Institutions
As a result of these new regulations, EU financial institutions should prepare for these changes and take appropriate measures since this improved regulatory framework is expected to have profound implications for FIs across the region. These measures include:
- Familiarising themselves with the new requirements and investing in training programs to educate their staff on the new regulations and their implications.
- Updating their internal policies and procedures to align with the enhanced due diligence measures and reporting obligations.
- Conducting a gap analysis to identify areas where their current practices may fall short and implement necessary adjustments.
- Establishing a robust compliance framework to facilitate cooperation with AMLA and ensuring their institution is prepared for direct supervision.
Resources and Further Information
To aid in understanding and implementing these new AML/CFT measures, the European Commission has published several resources, including FAQs on the AML/CFT package and FAQs on the AMLA, a factsheet, and an article on the new regime. These documents provide valuable insights and guidance for compliance professionals and financial institutions navigating the changes.
Conclusion
The adoption of the AML/CFT package marks a significant milestone in the EU’s efforts to tackle money laundering and terrorism financing. By centralising supervision and harmonising regulations, the new framework aims to improve the EU’s capacity to detect, prevent, and combat financial crimes more efficiently.
For compliance consultants and financial services firms, this development highlights the importance of staying ahead of the regulatory changes and maintaining robust AML/CFT measures. Finally, the creation of the AMLA, with its central supervisory role, signifies a new era of enhanced regulatory oversight and uniformity across the EU.
How MAP S.Platis Can Help
For more information on how the AML reforms will impact your operations and for assistance in preparing for these changes, please contact us. Our expert team is well-positioned to support you with:
- Consulting and support on AML-related matters.
- Preparation of GAP Analysis reports to ensure compliance with the AML regulatory framework.
- Delivery of training to key compliance personnel in managing financial crime risk.
- Monitoring and assessment of the correct and effective implementation of your practices, measures, procedures, and controls, as well as drafting relevant policies tailored to your organisation’s needs.
- Review and assessment of your organisation’s client identification, due diligence procedures, and information obtained from clients.
- Ad-hoc AML/CTF health-check reports.
Contact us today to find out how we can assist you.