In a bid to strengthen its defences against financial crime, the European Union has taken a significant stride with the establishment of the Anti-Money Laundering and Countering the Financing of Terrorism Authority or AMLA.
As the “central authority coordinating national authorities to ensure the correct and consistent application of EU rules,” (European Commission, 2021) AMLA will directly supervise entities in the financial sector which are exposed to the highest risk of money laundering and terrorism financing.
In this article, we take a look at what the AMLA is, why it’s been established, and what it might mean for compliance teams in regulated firms.
Why has the EU Anti-Money Laundering Authority (AMLA) been established?
Amid an increase in cross-border crime, surges in digital transactions, and the rise of Artificial Intelligence (AI) being used to facilitate illicit activities, the establishment of the new authority represents a pivotal response to the evolving nature of financial crime and money laundering.
In 2019, following a number of high-profile cases of money laundering taking place in EU institutions, the European Commission took it upon themselves to evaluate the effectiveness and efficiency of AML and CFT frameworks at the time. After detailed analysis, the Commission concluded that reforms were necessary.
The AMLA was created to address shortcomings in regulatory supervision in the EU and improve consistency in the application of anti-money laundering efforts across member states, especially within entities that bear the highest money laundering or terrorist financing risk.
What’s more, the AMLA aims to strengthen cooperation between Financial Intelligence Units (FIUs) through the establishment of “a common structure to underpin this cooperation […] and improving the exchange of information between FIUs” (European Commission, 2021).
Key functions and powers of the AMLA
The AMLA has a number of powers and functions aimed at strengthening the EU’s regulatory framework for combating financial crime and terrorist financing while also improving enforcement processes.
Enhanced information sharing: The authority serves as a central hub for the exchange of AML-related information among member states, fostering greater collaboration and intelligence sharing.
Coordinated investigations: By coordinating joint investigations and operations, the authority streamlines efforts to combat cross-border money laundering and financial crime, improving the effectiveness of law enforcement.
Assistance and guidance: The AMLA is able to provide technical expertise and support to member states and regulators to help in the implementation of AML measures and building consistency across the Union.
Supervisory oversight: The authority has oversight of both supervisory and regulatory bodies within member states, ensuring compliance with AML directives in the EU and promoting consistency in enforcement.
Imposing sanctions where necessary: In cases of non-compliance of regulatory breaches, the AMLA has the authority to impose sanctions and financial penalties on regulated entities to deter financial activities.
Implications for regulated firms and compliance
For compliance teams in regulated firms operating in the EU, the establishment of the AMLA will have several implications in terms of AML compliance requirements and expectations.
With the centralisation of AML oversight and enforcement at EU level, regulated firms can anticipate heightened regulatory scrutiny and more rigorous compliance expectations. Firms need to ensure that they take a proactive approach to AML compliance, with a focus on risk assessment, due diligence, and ongoing monitoring procedures.
Furthermore, the authority’s mandate to build consistency in AML requirements and enforcement across member states acts as a reminder to firms to align their policies and procedures with EU directives and guidelines. This not only ensures strengthened defences against bad actors across the board, but mitigates regulatory risks and non-compliance.
Since the AMLA aims to become the EU’s central repository for AML-related intelligence and reports, firms are likely to face heightened reporting obligations and information sharing requirements. As a result, compliance teams must remain vigilant in identifying and reporting suspicious activity.
Failing to uphold robust AML controls and compliance frameworks puts firms at risk of being subject to the authority’s power to take enforcement action. Non-compliance can result in severe repercussions, including financial penalty, reputation damage, and regulatory sanctions, and, as such, firms must take a proactive and risk-based approach to AML compliance.
Future outlook for firms affected by the EU AMLA
As the EU’s AMLA assumes its role as a cornerstone in the fight against financial crime, the future of AML compliance for regulated firms is also poised for transformation.
Compliance teams must adapt to the evolving regulatory landscape by embracing technological innovations that enable them to streamline and unify processes, enhancing risk-based approaches to compliance, and fostering a culture of vigilance and integrity within their organisations.
What’s more, collaborating with regulators, investing in training and adopting best practices will be instrumental in navigating the complexities of AML compliance in this new era of centralised oversight and enhanced regulatory scrutiny.
