AML/CFT Legislative Package Presented by the European Commission

The European Commission have presented a package of legislative proposals aimed at improving the EU’s AML/CFT legislation, including a proposal to create a new EU wide central authority to fight money laundering.

The four legislative proposals making up the package are proposals to:

• create a new EU AML Authority
• issue EU wide AML/CFT regulation 
• issue a 6th directive on AML/CFT
• revise the 2015 regulation on transfer of funds

The new authority is to be called the EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) and aims to address the shortcomings of the AML/CFT supervision in the European Union.

Since the AML/CFT supervision is currently member-based in the EU, its quality and effectiveness are uneven. The AMLA will take on the task of directly supervising and taking decisions towards some of the riskiest cross-border financial sector obliged entities. It will also coordinate national supervisory authorities and assist them to increase their effectiveness in enforcing the single rulebook and ensuring homogenous and high quality supervisory standards, approaches and risk assessment methodologies.

The second proposal is for a Regulation on the prevention of the use of the financial system for the purposes of money laundering (ML), terrorist financing (TF) and to avoid regulatory divergences.

The new regulation means all rules that apply to the private sector have been transferred to this proposal for an AML/CFT Regulation, whereas the organisation of the institutional AML/CFT system at national level is left to a Directive, in recognition of the need for flexibility for Member States in this area.

Along with this change there are minor changes to ensure consistent application of rules, to amend beneficial ownership requirements, help guide SARs and to the definition of a PEP.

The proposed 6th AML/CFT Directive establishes the mechanisms that Member States should put in place to prevent the use of the financial system for ML/TF purposes, and repeals the old Directive (EU) 2015/849.

However, the proposal doesn’t simply transfers provisions from the current Directive to a future one; a number of changes of substance are also made in order to bring about a greater level of convergence in the practices of supervisors and FIUs and in relation to cooperation among competent authorities.

The final proposal amends Regulation (EU) 2015/847 of the European Parliament and the Council of 20 May 2015 on information accompanying transfers of funds, extending to crypto assets the information requirements currently applying to wire transfers, with the necessary adjustments needed due to the differences in some of their features. This change was implemented due to transfers of virtual assets remaining outside of the scope of Union legislation on financial services, exposing holders of crypto-assets to money laundering and financing of terrorism risks.

A link to the source article can be found here.