The European Council Adopts a Comprehensive AML Package: A Legal Perspective

Corporate Clients, AML, White collar crimes and investigations

On 30 May 2024, the European Council adopted a new and comprehensive package of anti money laundering (AML) rules, marking a significant advancement in the European Union’s (EU) ongoing efforts to combat money laundering and counter the financing of terrorism (CFT). These efforts have been evolving since the first AML directive was introduced in 1991. Over the decades, the EU’s legal framework in this domain has undergone numerous revisions, each aimed at tightening regulations, enhancing transparency, and ensuring more effective enforcement across member states. The newly adopted package is a pivotal step toward further harmonising AML regulations within the EU, thereby promising more robust mechanisms to tackle financial crime across Europe.

The New Comprehensive AML Package: Overview and Content

The new AML package is a multifaceted legal framework designed to be implemented both at the national level and directly by natural and legal persons. The package consists of:

1. A directly applicable AML Regulation for the private sector.
2. A new AML Directive that EU Member States are required to transpose into national law.
3. The establishment of a new EU Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA).

These instruments collectively aim to create a uniform, rigorous, and enforceable AML framework across the EU, reducing discrepancies in national legislation and enforcement.

The New AML Regulation: Key Provisions

The regulation introduces stringent, directly applicable AML rules across all Member States, significantly increasing the obligations of entities involved in various financial and commercial activities. Key elements include:

Expanded Scope of Obliged Entities: The regulation broadens the range of entities subject to AML obligations, now encompassing credit and financial institutions, certain professions such as lawyers and accountants, crypto-asset service providers, traders in luxury goods (including precious metals, stones, yachts, and cultural goods), and even professional football clubs and agents. However, Member States retain some discretion to exclude entities they consider low-risk, such as football clubs, from this list.

Enhanced Due Diligence Requirements: Obligated entities must implement enhanced due diligence for transactions involving high-risk third countries, ensuring that the EU’s internal market is protected from potential financial crimes.

Stricter Beneficial Ownership Rules: The regulation sets the beneficial ownership threshold at 25%, with a comprehensive framework to track and verify beneficial owners. These rules apply not only to EU-based entities but also to non-EU entities operating within the EU, thus extending the reach of EU AML rules globally.

Cash Payment Cap: To curb the risks associated with large, untraceable cash transactions, the regulation imposes a cap of EUR 10,000 on cash payments. Member States have the option to adopt even lower thresholds; for example, Bulgaria currently enforces a limit of BGN 10,000 (approximately EUR 5,000), applicable to both individual payments and related transactions.

The New AML Directive: Key Aspects

Together with the regulation, the directive forms part of the “single rulebook,” superseding the fifth AML Directive and establishing uniform standards across the EU. Significant elements include:

National Financial Intelligence Units (FIUs): The directive outlines the structure and functions of national FIUs, which will play a crucial role in collecting, analysing, and disseminating financial information to combat money laundering and terrorist financing.

Single Access Point for Bank Registers: A new centralised system will allow FIUs across the EU to access information from national bank registers, including details about bank account owners and their holdings. This access is restricted to FIUs, although a parallel directive is anticipated to extend access to law enforcement agencies. There is also provision for a single access point for real estate information, further enhancing transparency.

Interconnected Beneficial Ownership Registers: Member States are required to maintain and interconnect central beneficial ownership registers, ensuring immediate, unfiltered access for competent authorities. This measure also mandates that the information be accessible to any interested party without notifying the legal entity involved, thereby increasing transparency and accountability.

Establishment of the EU AML Authority (AMLA)

The concept of a dedicated EU AML Authority (AMLA) has been under consideration since 2021, with the European Council finalising its proposal on 22 February 2024. The AMLA, which will be based in Frankfurt and operational by mid-2025, will be a central pillar of the EU’s AML framework. It will be staffed by over 400 employees and vested with both direct and indirect supervisory powers over obliged entities. Additionally, the AMLA will coordinate the activities of national FIUs and possess the authority to impose sanctions for breaches of AML regulations.

Deadlines for Implementation and Transposition

The regulation will become fully applicable three years after its entry into force, following its publication in the EU’s Official Journal. As for the directive, Member States are generally required to transpose its provisions within three years of its entry into force. However, certain provisions, such as those relating to beneficial ownership registers, have a shorter transposition deadline of two years, reflecting the urgency and importance of these measures in the fight against money laundering.

Conclusion

The adoption of this comprehensive AML package represents a critical step forward in the EU’s efforts to create a cohesive and effective framework to combat money laundering and terrorist financing. By introducing more stringent rules, enhancing transparency, and establishing a dedicated supervisory authority, the EU is poised to significantly bolster its defences against financial crime. While the rules will take time to come into full effect, the long-term impact on the legal and financial landscape across Europe is expected to be profound.

For further inquiries or expert advice on AML compliance, please do not hesitate to contact our legal specialists.