The European Commission has announced the creation of a new EU authority to fight money laundering, as part of a series of proposals to combat rising fraud threats.
These new proposals hope to improve the detection of suspicious transactions and activities, and close loopholes used by criminals to launder illicit money or finance terrorist activities through financial institutions.
The changes update the EU regulatory framework to account for new and emerging technology, including digital currencies, more integrated financial flows in the single market and the global nature of terrorist organisations.
There are four legislative proposals in the European Commission’s package. The first of which is a new EU AML/CFT Authority. The second proposal is a regulation on AML/CFT that contains directly applicable rules, including the areas of customer due diligence and beneficial ownerships.
Thirdly, the regulator has suggested to implement a sixth directive on AML, which will be transposed into national law by member states.
Finally, the European Commission wishes to revise the regulation on transfers of funds to trace transfers of crypto-assets.
These changes are set to be discussed in the European Parliament and Council. It hopes the new AML Authority can be in operation in 2024.
Speaking on the proposals, European Commission executive vice president Valdis Dombrovskis said, “Every fresh money laundering scandal is one scandal too many – and a wake-up call that our work to close the gaps in our financial system is not yet done.
“We have made huge strides in recent years and our EU AML rules are now among the toughest in the world. But they now need to be applied consistently and closely supervised to make sure they really bite. This is why we are today taking these bold steps to close the door on money laundering and stop criminals from lining their pockets with ill-gotten gains.”
With the creation of the EU AML Authority (AMLA), the regulator hopes to transform AML and CFT supervision in the EU and bolster cooperation among financial intelligence units. The authority will ensure the private sector correctly and consistently applies EU rules and will help improve analytical capacities for financial intelligence units.
The AMLA will also established an integrated system of AML and CFT supervision across the EU, based on common supervisory methods. It will also directly supervise some of the riskiest financial institutions that operate in a large number of member states.
Furthermore, it will monitor and coordinate national supervisors responsible for other financial entities and support cooperation among financial intelligence units and foster coordination and analyses between them.
As part of the proposals, the European Commission has suggested there should be a single EU rulebook for AML and CFT to standardise supervision and work. This will include the detailed rules on customer due diligence and beneficial ownership, as well as the powers and task of supervisors and financial intelligence units.
In terms of cryptocurrency regulations, the proposals state the AML and CFT will encompass the entire crypto sector. This means all service providers will need to complete due diligence on customers. It hopes these changes will ensure full traceability of crypto-assets, like bitcoin, and detect possible money laundering or terrorism financing incidents.
The new proposals also place a EU-wide limit of €10,000 on large cash payments. The regulator states large cash payments are the easiest way to launder money and hopes this can make it harder. There are already limits in around two-thirds of member states, but with varying amounts. National limits under €10,000 can remain in place.
Finally, the proposals will see the EU work closer with global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF). If a country is listed by the FATF, it will also be listed by the EU, either on its blacklist or greylist, depending on FAFT’s decision.
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