In the wake of the announcements from both the EU Parliament and the Council, the political agreements on the AML/CFT Package have now been disclosed.
While a revised Transfer of Funds Regulation has already been published (which will apply as from 30 December 2024 within the framework of the adoption of Markets in Crypto Assets Regulation (MiCA Regulation)), the remaining three pillars of the much-expected AML/CFT Package have now been agreed upon. It is composed by the Anti-Money Laundering Authority Regulation (AMLA Regulation), the sixth directive on AML/CFT (AMLD6) and a new AML/CFT Regulation (AMLR).
1. The new AML/CFT Authority (AMLA Regulation)
Recognizing the evolving landscape of financial crimes, the proposed AMLA Regulation aims at addressing structural weaknesses and to harmonize the AML/CFT supervisory framework within the EU. Over the past three decades, divergent national interpretations and practices have impeded effective cross-border control of AML/CFT concerns, prompting the need for a comprehensive regulatory overhaul.
The AMLA's mandate includes EU-level supervision of the financial sector, convergence of supervisory practices, enhanced oversight of the non-financial sector, and active participation in the enforcement of financial sanctions.
AMLA is set to exercise direct supervisory jurisdiction over a select group of high-risk cross-border financial sector entities (up to 40 in the first wave selection) and to conduct comprehensive supervisory reviews at both individual entity and group-wide levels. Non-selected obliged entities will remain supervised at national level.
The new Authority will periodically conduct peer reviews of non-financial supervisors – including an assessment of the adequacy of powers and financial, human and technical resources, the degree of independence, the governance arrangements and professional standards of non-financial supervisor.
Additionally, AMLA will also host FIU.net, a dedicated IT system facilitating the cooperation and information exchange among FIUs, the cooperation with the authorities responsible for targeted financial sanctions and the exchange of information.
The new Authority will be based in Frankfurt and is to serve as a key player in beneficial ownership registry enforcement, regulatory dispute resolution, and facilitation of collaboration among FIUs and NSAs.
2. The New AML/CFT Regulation (AMLR)
The main objective of the AMLR is the achievement of a greater level of harmonization and convergence in the application of AML/CFT rules across the European Union, through the implementation of a directly applicable and more detailed AML/CFT framework.
Therefore, the provisions contained in the AMLR will be entirely and directly applicable in all EU-Member States without the requirement of any national transposition instruments. The agreement now reached between the EU Parliament and the Council has resulted in a significant evolution from the European Parliament's previous position and some of the more noticeable aspects of the finalized AMLR are as follows:
For instance, on the limits to be imposed on transactions in cash and on crypto-assets: the EU-wide limit is now set on EUR 10 000 for cash transactions – instead of the amount of EUR 7 000 previously determined by the EU Parliament. Below the threshold of EUR 10 000, occasional transactions will remain subject to light customer due diligence requirement when exceeding EUR 3 000.
On the crypto-assets field, crypto-assets service providers are required to apply customer due diligence measures when carrying out an occasional transaction reaching or exceeding EUR 1 000, with lighter costumer due diligence requirements remaining applicable even below such threshold.
The new definition of beneficial ownership has been maintained in alignment with the EU Commission's initial proposal, in contrast to the position published in April by the European Parliament: the threshold is maintained at 25% or more of the shares or voting rights. For legal entities associated with a higher AML/CFT risk as per the national risk assessment, such threshold can then be reduced at EU- Member State level up to a minimum threshold of 15%, according to a delegated act process by the EU Commission.
Further amendments and clarifications have been undertaken at the level of the beneficial owner definition, both at the ownership and control legs with further granularity. The AMLR also provides for some clarification on the methodology to be used in order to assess the beneficial owner in multilayered structures (and especially in case of a coexistence of ownership and control features). Ad hoc rules are laid down now under the AMLR for funds and specific nominee related disclosures. For both points, we expect further guidance regarding the correct application.
Whereas, the rules around the beneficial owner register have been further specified also for legal arrangements and trust schemes, it is worth highlighting that the rule has been finally kept that foreign legal entities and arrangements will have to register in the EU based registers of beneficial owners when entering into specific business relationships with EU based obliged entities or in case of EU based acquisition ventures.
Enhanced due diligence measures are no longer automatically required for "large wealth" business relationships (for which specific criteria have been set), but only to the extent that a higher risk has been identified according to the obliged entity's risk-based approach.
AMLR also brings in specific requirements for cross-border correspondent relationships: enhanced due diligence measures must be put into place based in a risk-based approach, with some particularities on the crypto-asset service providers' field. Additionally, credit institutions and financial institutions must refrain any correspondent relationship with shell institutions.
3. The New AML/CFT Directive (AMLD 6)
AMLD 6 is set to address the organization of institutional AML/CFT framework at national level. The directive relocates the rules applying to the private sector from AMLD 6 to the AMLR to ensure a consistent level of compliance across the EU single market.
The new directive will introduce changes on supra-national and national risk assessments, powers and cooperation measures, as well as general provisions on AML/CFT supervision, administrative measures, and sanctions.
AMLD 6 clarifies the jurisdictional responsibilities of supervisors, particularly concerning obligated entities operating across borders. EU-Member States are thus tasked to ensure rigorous supervision of these entities within their territories This collaborative approach between national regulators and the newly established AML/CFT Authority ensures a unified front against ML/TF.
The framework for pecuniary penalties and administrative measures is also revised, by doubling the maximum amount of the pecuniary sanctions imposed on credit or financial institutions – from EUR 5 000 000 to EUR 10 000 000. Additionally, it introduces new periodic penalty payments that national regulators can levy on to enforce adherence to administrative requirements.
Under the AMLD6, supervisors and FIUs are now mandated to report annually on their collaborative efforts with other authorities to the AML/CFT Authority, aiming to improve the information exchange and enhancing coordination in combating financial crimes across the European Union.
As far as the access to the beneficial owners' national central registers is concerned, the EU Parliament's position has been preserved to a certain extent. Thus, access to the information contained therein must be allowed to persons with a legitimate interest, such as journalists, reporters, any other media, civil society organizations, and persons likely to enter a transaction with a legal entity or legal arrangement and wishes to prevent any link with ML/TF.
Furthermore, AMLD 6 allows EU-Member States to request additional information when doubts arise regarding the accuracy of beneficial ownership. It also sets clear rules on reporting discrepancies in beneficial ownership data to the central register authority, bolstering efforts to combat illicit financial activities.
4. Next steps
The EU Parliament is expected to adopt the above-mentioned three texts of the AML/CFT Package in late April of this year, with subsequent adoption by the Council and publication in the Official Journal of the European Union swiftly thereafter. More to follow on new and more detailed Newsflashes after the Parliament adoption, rolling out any last-minute change.
The application of the new AMLR is anticipated by mid-2027, concurrently with EU-Member States beginning to apply AMLD 6.
The AML/CFT Authority should assume most of its tasks and powers by mid-2025 and commence direct supervision of selected obliged entities as of 2028.
How we can help
As the new AML/CFT Package emerges, banks and financial entities (including investment funds), whether directly or indirectly affected, must prepare for a more stringent EU AML/CFT framework. Key steps involve assessing current policies, implementing robust AML/CFT controls, and ensuring compliance across all EU business lines.
Stay tuned for our upcoming thematic conferences on the three pillars of the AML/CFT package as the EU takes a decisive step towards a more efficient, uniform, and robust AML/CFT regulatory and supervisory framework.
At the level of the Arendt Group, our AML/CFT experts are uniquely positioned to assist you throughout the entire value chain in bringing your business in full compliance with the new requirements of the AML/CFT Package_ We have put together a complete service offering ranging from policy reviews, gap assessments, legal and operational assistance, so let us get in touch!
Read the Arendt Newsflash on the EU Parliament's positions on the AML/CFT Package here_
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