European Commission publishes major anti-money laundering legislative proposals

Introduction

On 20 July 2021, the European Commission (the “Commission”) presented a new legislative package containing significant changes to the applicable anti-money laundering and anti-terrorism financing ("AML/CFT") regime. The Commission hopes to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system. The legislative package introduces two new regulations and amends one existing directive and one existing regulation. The package includes a proposal for the creation of a new EU authority to fight money laundering.

The four legislative proposals

1. A Regulation establishing a new EU AML/CFT Authority

The first legislative proposal introduces a new EU authority for AML/CFT (the "Authority"). The Commission notes that the current supervision of AML/CFT rules is uneven in quality and effectiveness, due to significant variations in resources and practices across the Member States. The legislative proposal provides a very detailed list of tasks. The various tasks of the Authority can be divided into five areas:

• The Authority will be the direct supervisory authority for a limited number of the riskiest cross-border financial sector obliged entities (i.e., credit institutions and other financial institutions that operate in several Member States). The Authority will have the powers to adopt binding decisions, administrative measures, and pecuniary sanctions towards directly supervised obliged entities.
   
• The Authority will have various tasks to ensure the effective and consistent functioning of the AML/CFT supervisory system in the EU.  
   
• The Authority will provide support to Financial Intelligence Units (“FIUs”) and coordinate certain activities of various FIUs of member states.  
   
• The Authority will also be responsible for the oversight of supervisors in the non-financial sector with regard to compliance with AML/CFT requirements.
   
• The Authority will promulgate regulatory technical standards and implement technical standards where this is provided for in the applicable AML/CFT legislation. Additionally, it will have a broad power to adopt guidelines or recommendations addressed to obliged entities, AML/CFT supervisors or FIUs.
   

The Commission intends the regulation to apply from 1 January 2024. The Authority is planned to start functioning on 1 January 2023.

2. A new Regulation on AML/CFT  

The second proposed piece of legislation is a new regulation on AML/CFT. This regulation will harmonise the main AML/CFT obligations across the EU and will be directly applicable. It will replace many existing obligations under the current national AML/CFT frameworks; it will include more detailed rules on customer due diligence, beneficial ownership and the powers and task of supervisors and FIUs, alongside provisions for the connection of existing national registers of bank accounts and faster access for FIUs to information on bank accounts and safe deposit boxes. The proposed Regulation also includes crypto-asset service providers in its scope, meaning that many of crypto related service providers will be obliged to conduct due diligence on their customers.

3. A sixth Directive on AML/CFT (“AMLD6”)

The third proposed legislation replaces the current fourth anti-money laundering directive (as amended by the fifth anti-money laundering directive). This proposal introduces (i) measures applicable to sectors exposed to money laundering and terrorist financing (e.g., Member States should perform regular risk assessments and can share these with the Commission),(ii)  the set-up and access to beneficial ownership, bank account and real estate registers, (iii) responsibilities and tasks of FIUs and supervisors, and (iv) cooperation between authorities.

4. A revision of the 2015 Regulation on Transfers of Funds to trace transfers of crypto-assets

The fourth and final proposal extends the scope of the regulation on transfers of funds to include transfers of crypto-assets made by Crypto-Asset Service Providers ("CASPs") in addition to the current provisions on the transfer of funds.

In accordance with the proposed amendments, the CASP of the originator must ensure that transfers of crypto-assets are accompanied by the name of the originator, the originator’s account number (where such an account exists and is used to process the transaction), and the originator’s address, official personal document number, customer identification number and date and place of birth.

Takeaways

The Commission’s proposals show that AML/CFT is an important focus on an EU level. The rules will be increasingly harmonised; for instance, if one of the Regulations enters into force, the Dutch Wwft will largely be replaced) and international cooperation between authorities will continue to strengthen. The proposals, if adopted by the European Parliament, would enter into force in a couple of years.