15 September 2021

Newsflash | Beating Financial Crime



The European Commission proposes a new anti-money-laundering draft legislation package to strengthen the EU's anti-money laundering and countering terrorism financing rules...
European Union Government, Public Sector
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The European Commission proposes a new anti-money-laundering draft legislation package to strengthen the EU's anti-money laundering and countering terrorism financing rules

On 20 July 2021, the European Commission ("Commission") presented an ambitious package of legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing rules.

As part of the Commission's commitment to protect EU citizens and the EU's financial system against money laundering and terrorist financing, the package constitutes a logical step, given the increasing number of money laundering scandals in Europe and abroad. Although the complex issue of dirty money flows is not new, the COVID 19 crisis has certainly given a major impetus to the matter. Indeed, Europol currently estimates that approximately 1% of the EU's annual gross domestic product is involved in suspicious financial activities .

As Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union rightly stated in regard of the proposed package: "Money laundering is a real and present threat to citizens, democratic institutions and the financial system. The scale of the problem should not be underestimated and the loopholes that can be exploited by criminals must be closed."

The aim of the package consists therefore in measures to better detect suspicious transactions and activities and to close loopholes that criminals use to launder the proceeds of illegal activities or to finance terrorist activities through the financial system. Four major legislative proposals are put forward:

  1. a Regulation establishing a new EU AML/CFT authority;
  2. an AML/CFT Regulation, containing directly applicable rules, including on customer due diligence and beneficial ownership;
  3. a Sixth AML/CFT Directive ("AMLD6"), replacing the current AML Directive 2015/849/EU of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and containing provisions that will be transposed into national law, such as rules on national supervisory authorities and financial intelligence units in the Member States; and
  4. a revision of Regulation 2015/847/EU of 20 May 2015 on information accompanying transfers of funds to ensure traceability of transfers of crypto-assets.

In summary, the proposed package, due to the different legislative clarifications it contains in the field of anti-money laundering and combating the financing of terrorism, aims to contribute to greater harmonisation within the EU, as the transposition of anti-money laundering Directives has created different loopholes in the past, with each Member State having a certain amount of leeway when it comes to transposition at national level.

An important novelty, however, is the proposal to create a new EU authority in the field of anti-money laundering. The Anti-Money Laundering Authority ("AMLA") , would take the form of a decentralised regulatory agency. AMLA would be based in one of the EU Member States, and its projected 250 employees would have both the task of monitoring financial flows and of supporting the various national financial intelligence units.

Finally, it should also be noted that the Commission proposes  to impose a stricter legal framework on crypto-currencies. In this relatively unregulated area, the Commission has a major objective:  impose the same anti-money laundering rules on all crypto-transactions as those on "classic" money transfers. The amendments aim therefore to ensure full traceability of transfers of crypto-assets as well as prevent and detect their possible use for money laundering or terrorist financing purposes.

While it is clear that the legislative package will first be discussed by the European Parliament and the Council, it is also undeniable that these proposals if adopted  could have a considerable impact on the current AML/CFT framework.

[1] Céline Schoen, Bruxelles réclame une autorité européenne de lutte contre la criminalité financière

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