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The European Parliament and Council teams have reached an agreement on a European Anti-Money Laundering Authority (AMLA), and are unified on a political agreement to criminalise the violation of EU sanctions.
The Council of the EU and European Parliament reached a provisional agreement on creating a new authority for countering money laundering and financing of terrorism (AMLA).
AMLA was first proposed in 2021 and serves as the centrepiece of the EU’s anti-money laundering package.
However, the Parliament and Council still need to decide on where the authority will sit.
Given the cross-border nature of financial crime, the EU is banking on this new authority boosting the efficiency of the anti-money laundering and countering the financing of terrorism (AML/CFT) framework — which has been revealed as weak due to a variety of scandals, such as with Danske Bank, Wirecard and the Panama Papers leak.
The AMLA intends to create an integrated mechanism with national supervisors to ensure obliged entities comply with AML/CTF-related obligations in the financial sector. AMLA will also have a supporting role with respect to non-financial sectors, and coordinate financial intelligence units (FIUs) in member states.
In addition to supervisory powers and in order to ensure compliance, in cases of serious, systematic or repeated breaches of directly applicable requirements, the authority will impose pecuniary sanctions on entities that are in its scope — the largest financial service providers in Europe.
The agreement entrusts the authority to supervise up to 40 groups and entities in the first selection process.
The provisional agreement also adds powers to AMLA to directly supervise certain types of credit and financial institutions, including crypto asset service providers, if they are considered high-risk or operate across borders.
“AMLA will be a game changer to crack down on dirty money in the EU,” commented Eva Maria Poptcheva, MEP and co-rapporteur. “It will supervise the 40 riskiest financial entities and it will oversee the non-financial sector to prevent cases like the Pandora Papers.”
Poptcheva said that AMLA will also play a crucial role in avoiding the circumvention of targeted financial sanctions like the ones included in the 11 sanctions packages approved by the EU against Russia.
Harmonised rules and application
Given the connections between AMLA and the rules it will enforce, the co-legislators also reached a provisional agreement on elements of the wider money-laundering package, which includes a new directive and a new regulation.
This package also included a crypto-focused transfer of funds regulation (TFR), which has already been implemented.
Negotiators agreed on several horizontal points that would harmonise AML/CTF rules and help member states to apply them more consistently.
New provisions agreed upon by the co-legislators include the creation of reporting channels for receiving and handling information on breaches and protection of whistle-blowers, as well as effective cooperation between national FIUs and AMLA.
The Parliament also inserted new rules against circumvention of targeted financial sanctions and AMLA’s supervisory role in ensuring implementation by obliged entities of targeted financial sanctions.
“The European Parliament gave AMLA an important and strong role in the fight against money laundering,” said Emil Radev, fellow co-rapporteur. “We hope that it will guarantee more financial security and better cooperation with national supervisors and FIUs in a cross-border environment, where risks have been growing at a constant pace.”
New sanctions agreement
Separately, the Council and Parliament have reached a political agreement to criminalise the violation of EU sanctions.
This is intended to ensure that those who violate or circumvent EU sanctions will be prosecuted, something that the Council has said gains particular importance in the context of the Russian war against Ukraine.
The law lays down that member states will need to define certain actions as criminal offences.
These include providing financial services or performing financial activities that are prohibited or restricted, helping persons subject to EU restrictive measures to bypass a travel ban, trading sanctioned goods and running transactions with states or entities that are hit by EU restrictive measures, and covering up the ownership of funds or economic resources by a person, entity or body that is sanctioned by the EU.
The Council and the European Parliament negotiators have agreed that companies can also be held liable for the offences defined in this directive. This would be the case when such an offence has been committed — to their benefit — by a person with a leading position in the organisation.
Companies that are found to have violated restrictive measures would have to face sanctions that include the disqualification of business activities and the withdrawal of permits and authorisations to pursue their economic activities.
The directive also means that member states will be held more accountable, and must ensure that violating EU sanctions is punishable by effective, proportionate and dissuasive criminal penalties.
When the violation of a restrictive measure happens intentionally the maximum penalty must provide for a prison sentence, and member states must ensure that the crimes defined under this directive are punishable by least one year of imprisonment or at least five years of imprisonment, depending on the offence.
In addition to imprisonment, those who have violated EU restrictive measures may be subject to fines.
The provisional agreement will now be submitted to the member states’ representatives for endorsement. If approved, the text will then be formally adopted by both the Council and European Parliament.
An obstacle that could stand in the way of this is the fact that the 27 member states are not entirely united on the issue of Russia’s invasion of Ukraine; member state heads in Slovakia and Hungary, for example, are much more aligned to Russia.
In addition, the election outcome in the Netherlands may also mean that representatives for the country become less enthusiastic about implementing such tough measures.
