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Good morning. This is Sakimura, on my way to the 28th Shirahama Symposium on Cybercrime.

In the first and second installments of this series, we examined the documents behind the current revision. This time, we finally turn to the core legislative amendments.

Overview

On June 19, 2024, the EU published in the Official Journal of the European Union an “AML package” consisting of the following:

  • Regulation (EU) 2024/1620 establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA)1 (AMLAR).
    • This establishes the new European Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), based in Frankfurt. The regulation enters into force 7 days after publication and applies from July 1, 2025.
  • Regulation (EU) 2024/1624 on preventing use of the financial system for money laundering or terrorist financing (AMLR)2
    • This new regulation harmonizes AML rules across the EU and closes loopholes exploited by wrongdoers. It enters into force 21 days after publication and applies from July 10, 2027 (except that certain transactions by football agents and professional football clubs are covered from July 10, 2029).
  • Directive (EU) 2024/1640 on mechanisms to be put in place by Member States to prevent use of the financial system for money laundering or terrorist financing (AMLD 6)3
    • This directive amends Directive (EU) 2019/1937 and amends and repeals Directive (EU) 2015/849. It improves the organization of national AML systems and cooperation among Financial Intelligence Units (FIUs) and supervisory authorities. It enters into force 21 days after publication. Member States must transpose it into national law by July 10, 2025.

These requirements will be phased in, allowing internal procedures to be adjusted to the new regulatory environment.

Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA)

  • AMLA will be headquartered in Frankfurt, Germany, and will perform the following roles:
    • Conduct periodic assessments of credit and financial institutions operating in at least 6 Member States, and directly or indirectly supervise high-risk entities
    • Make binding decisions and impose administrative and financial penalties for noncompliance
    • Coordinate national supervisors’ approaches and issue guidelines

Regulation on preventing use of the financial system for money laundering or terrorist financing (AMLR)

The AMLR introduces the following:

  • Extension of AML rules to new obliged entities4, including the crypto-asset sector, luxury-goods traders, and football clubs
  • Stricter due-diligence requirements, beneficial-ownership rules, and a cash-payment limit of 10,000 euros. Direct and indirect AMLA supervisory powers over high-risk obliged entities in the financial sector
  • Power for AMLA to impose sanctions for serious, systematic, or repeated breaches of AML requirements

It also introduces new obligations for obliged entities and Member States, including:

  • Periodic employee assessments
  • Group-wide AML and CFT measures
  • New rules on outsourcing arrangements
  • Regulation of due-diligence and KYC procedures
  • Countermeasures against high-risk third countries
  • Prohibitions and special obligations, such as correspondent relationships with shell institutions
  • Information-sharing frameworks
  • Document-retention periods
  • Cooperation with Financial Intelligence Units (FIUs5)
  • Suspension of transactions suspected of involving criminal proceeds or financing

Directive on mechanisms to be put in place by Member States to prevent use of the financial system for money laundering or terrorist financing (AMLD 6)

AMLD 6 expands the scope of Member States’ obligations in implementing legal solutions to combat money laundering and terrorist financing. Specifically, it:

  • Requires Member States to make information in central bank-account registers showing where each person holds accounts available through a single access point
  • Ensures that national law-enforcement agencies can access these registers through that single access point
  • Harmonizes bank-statement formats to support crime prevention and tracing of proceeds (Harmonization of bank statement format)
  • Authorizes Member States to extend AML rules to specified high-risk business sectors
  • Requires Member States to regulate golden visas and golden passports and maintain a single central account register

AMLA is also expected to issue regulatory technical standards on sanctions for AML and CFT violations.

Expected Market Impact

The EU Anti-Money Laundering Regulation (AMLR), Anti-Money Laundering Authority (AMLA), and 6th Anti-Money Laundering Directive (AMLD 6) are expected to have a major market impact by introducing stricter rules and monitoring mechanisms. The principal expected effects are as follows:

Harmonization and Standardization

  • Single rulebook: The AMLR establishes one set of rules directly applicable throughout EU Member States, replacing the previous directive-based approach requiring national transposition. This will produce more uniform compliance standards and reduce regulatory fragmentation.
  • Expanded scope: The AMLR expands coverage to sectors including crypto-asset service providers, luxury-goods traders, and professional football clubs, increasing the number of businesses subject to AML regulation.

Enhanced Compliance Requirements

  • Customer due diligence: Stricter customer due diligence (CDD) requirements will be enforced, including transparency of beneficial ownership and enhanced due diligence for high-risk transactions and customers.
  • Internal policies and controls: Obliged entities must implement robust internal policies, controls, and procedures to comply with the new AML standards, potentially involving significant operational changes and increased compliance costs.

Operational and Financial Impact

  • Increased compliance costs: Businesses will face higher compliance costs because meeting the new AML requirements will require additional resources, staff training, and technology investments.
  • Technological adaptation: The need for advanced technology solutions for transaction monitoring and compliance management may encourage innovation and consolidation in the AML compliance-tools market.

Changes to Supervision and Enforcement

  • Centralized supervision: Establishing AMLA will centralize supervision and enforcement, strengthen coordination among national authorities, and ensure consistent application of AML rules throughout the EU.
  • Direct supervision: AMLA will directly supervise certain high-risk financial institutions, potentially resulting in more rigorous monitoring and higher fines.

Market Dynamics and Competition

  • Competitive environment: The new regulations may create a level playing field by requiring all market participants to meet the same high standards, while intensifying competition among compliant businesses.
  • Impact on financial services: Financial institutions will need to update their AML/CFT risk assessments and adapt their processes, potentially affecting operational efficiency and customer relationships.

Long-Term Benefits

  • Improved market integrity: By reducing the risks of money laundering and terrorist financing, the new AML framework may enhance the integrity and stability of the EU financial system and promote investor confidence and economic stability.
  • Global influence: The EU’s stringent AML measures may set a precedent for other jurisdictions and lead to stronger AML/CFT standards globally.

In summary, implementation of the EU AMLR, AMLA, and AMLD 6 will require substantial compliance effort and costs from businesses, but is expected to produce a stronger, more harmonized regulatory environment that enhances the integrity of the EU financial system.

Footnotes

  1. Establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA), and amending EU Regulations No. 1093/2010, 1094/2010, and 1095/2010: dated May 31, 2024, Regulation (EU) 2024/1620 of the European Parliament and of the Council
  2. Dated May 31, 2024, Regulation (EU) 2024/1624 of the European Parliament and of the Council on preventing use of the financial system for money laundering or terrorist financing (AMLR).
  3. Dated May 31, 2024, Directive (EU) 2024/1640 of the European Parliament and of the Council on mechanisms to be put in place by Member States to prevent use of the financial system for money laundering or terrorist financing.
  4. Obliged institutions are entities required to comply with anti-money laundering (AML) and countering the financing of terrorism (CFT) regulations. They include credit institutions, financial institutions, and other entities periodically assessed to ensure compliance with AML and CFT standards.
  5. Financial Intelligence Unit

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