The European Union’s new anti-money laundering / countering the financing of terrorism (AML/CFT) regime addresses previous shortcomings by harmonising regulations and enhancing enforcement tools, aiming to effectively prevent money laundering and terrorist financing, writes Claire Guilbert at Norton Rose Fulbright.
On 19 June 2024, the EU’s new AML/CFT regime was published in the Official Journal of the EU. The basis of the new regime is the European Commission May 2020 action plan for a comprehensive EU policy on preventing money laundering and terrorism financing. The legislative proposals for the regime were originally published by the commission in July 2021 but it then took co-legislators almost three years to reach agreement.
The new AML/CFT regime comprises a comprehensive package, featuring three key legislative texts:
- Regulation (EU) 2024/1624 (AMLR): Aimed at preventing money laundering and terrorist financing, this is known as the EU AML Single Rulebook. It is effective from 10 July 2027, with a delayed application for specific new entities until 10 July 2029.
- Directive (EU) 2024/1640 (AMLD6): This concerns mechanisms to be put in place by Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Directive (EU) 2019/1937, and amending and repealing Directive (EU) 2015/849, applicable from 10 July 2027.
- Regulation (EU) 2024/1620 (AMLAR): This establishes the EU authority for AML/CFT, effective from 1 July 2025, with certain provisions taking effect on 26 June 2024, and 31 December 2025.
In addition, the commission has presented as part of the proposal a regulation recasting the regulation on transfers of funds - Regulation (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849 that aims to make transfers of crypto-assets more transparent and fully traceable. This regulation was adopted in May 2023 and will apply as of December 2024.
Shortcomings of the previous framework
The AML/CFT package addresses several shortcomings in the previous frameworks, including:
- Diverse implementation: Inconsistent AML/CFT measures across EU member states hindered uniform enforcement.
- Insufficient enforcement instruments: Existing tools were inadequate for effectively detecting and penalising illicit activities, reducing deterrent effects.
- Inconsistent supervision: Varied AML/CFT supervision across member states complicated cooperation among EU financial intelligence units (FIUs).
Strengthening AML/CFT measures in the EU
The new AML/CFT package aims to address systemic weaknesses in the framework amongst the EU member states and close loopholes that criminals exploit to launder money or finance terrorism. It further aims to harmonise the legal framework by implementing a unified AML/CFT rulebook across EU Member States and to ensure consistent implementation and coordination among national authorities by establishing the EU AML/CFT Authority (AMLA).
Key components of the package
1. AMLR – The EU AML Single Rulebook
The AMLR enhances the existing AML/CFT framework with provisions on:
- Scope of application: Extends to crypto-asset service providers, high-value goods traders, certain professional football clubs, and gambling service providers.
- Internal policies and controls: Requires entities to establish internal policies and appoint compliance officers and managers responsible for AML/CFT adherence.
- Cash payment limit: Sets an EU-wide limit of 10,000 euro for cash payments, allowing lower national limits with prior notification.
- Beneficial ownership transparency: Mandates clear identification of individuals with 25 percent or more ownership in entities, with a potential lower threshold based on risk assessment.
- Data Protection and Record Retention: Revises provisions to facilitate competent authorities’ access to beneficial ownership information.
- High-Risk Third Countries: Obliged entities must apply enhanced due diligence measures for transactions involving high-risk countries, with potential additional countermeasures.
2. AMLD6
AMLD6 broadens the regulatory scope, clarifies money laundering offence definitions, and enforces stricter penalties. Key aspects include:
- Central registers of beneficial ownership: Requires accurate, up-to-date beneficial ownership information, which must be retained for at least five years.
- National AML supervision and FIUs: Enhances cooperation and information exchange among FIUs and other authorities, improving ML/TF detection and tracking.
- Central account registers: Centralised registers for IBANs, securities accounts, and crypto accounts, interconnected for efficient information exchange.
- Statistical reporting and supervisory colleges: Mandates publication of AML/CTF statistics and establishment of supervisory colleges.
3. AMLA
The AMLA is designed to be a central authority with the mandate to monitor and coordinate AML/CFT activities in the EU. It is intended to ensure that the implementation and enforcement of AML/CFT measures are consistent and effective across all Member States. The AMLA will have two main areas of responsibility: AML/CFT supervision of ‘obliged entities’ and supporting EU FIUs. Its home will be in Frankfurt, Germany and it will be operational by summer 2025.
Claire Guilbert, partner at Norton Rose Fulbright, is an investment management and investment funds lawyer based in Luxembourg. Norton Rose Fulbright is a Knowledge Partner of Investment Officer Luxembourg.
Related articles on Investment Officer Luxembourg:
- Luxembourg tax authority to get special AML unit
- CSSF fines BNP Paribas €3 mln for laundering lapses
- Asset managers don’t come to Luxembourg for the weather