Proposal for Stronger EU AML/CFT Rules

On 21 July 2021, the European Commission presented a package of legislative proposals to strengthen the EU’s anti-money laundering and countering the financing of terrorism (AML/CFT) rules. The legislative package follows in the wake of a number of prominent cases of alleged money laundering involving credit institutions in the EU.

The package consists of four legislative proposals:

1. A regulation establishing a new EU AML/CFT authority.
2. A regulation on AML/CFT.
3. A sixth directive on AML/CFT replacing the existing directive (Directive 2015/849/EU).
4. A revision of the regulation on information accompanying transfers of funds (Regulation 2015/847/EU).

At the heart of the legislative package is the new AML/CFT authority, which will establish a single integrated system of AML/CFT supervision across the EU. In particular, the new authority will directly supervise selected risky entities in the financial sector subject to AML/CFT requirements, monitor and coordinate national supervisors to ensure correct and consistent application of the AML/CFT rules in the member states, and support cooperation and information sharing among national financial intelligence units. The new AML/CFT authority will also have powers to draft regulatory and implementing technical standards, guidelines, and recommendations.

Another key point of the legislative package is the establishment of a single EU rule rulebook for AML/CFT, which will harmonise AML/CFT rules across the EU. Amongst others, the package contains directly applicable and more detailed rules on customer due diligence and beneficial ownership.

Additionally, the legislative package extends the AML/CFT rules to the entire crypto sector and ensures full traceability of crypto-asset transfers, and the Commission proposes to set up an EU-wide limit of EUR 10,000 to large cash payments making it harder to launder money.

Overall, the EU’s AML/CFT rules will be better suited to fight money laundering across the EU as well as terrorist financing as directly applicable rules will result in less regulatory divergences across member states which together with strengthened supervision at EU level and better coordination between national supervisors will close loopholes.

Next step: The legislative package is currently being discussed by the European Parliament and Council. The Commission expects that the new AML/CFT authority will be established on 1 January 2023 and fully operational in 2024.

Tags:  KYC / AML