On the 13th of December 2023, after months of intense negotiations between the European Commission (EC), European Parliament (EP) and EU governments (Council) on sweeping reforms to EU rules on anti-money laundering and countering the financing of terrorism (AML/CFT) reached a provisional agreement on creating a new European authority for countering money laundering and financing of terrorism (AMLA). The centrepiece of the anti-money laundering package, which aims to protect EU citizens and the EU's financial system against money laundering and terrorist financing.
This proposal comes after the EU Commission had presented its package of legislative proposals to strengthen the EU’s rules on anti-money laundering and countering the financing of terrorism (AML/CFT) back in July 2021. This package consists of:
- a regulation establishing a new EU anti-money laundering authority (AMLA) which will have powers to impose sanctions and penalties.
- a regulation recasting the regulation on transfers of funds which aims to make transfers of crypto-assets more transparent and fully traceable.
- a regulation on anti-money-laundering requirements for the private sector.
- a directive on anti-money-laundering mechanisms.
The Council and EP reached a provisional agreement on the regulation on transfers of funds on 29 June 2022.
The aims of the initiative
Given the cross-border nature of financial crime, the new authority will boost the efficiency of the anti-money laundering and countering the financing of terrorism (AML/CFT) framework, by creating an integrated mechanism with national supervisors to ensure obliged entities comply with AML/CFT-related obligations in the financial sector. AMLA will also have a supporting role with respect to non-financial sectors and coordinate financial intelligence units 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 AMLA will impose pecuniary sanctions on the selected obliged entities.
Supervisory powers
AMLA will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector. These will include:
- The provisional agreement 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 carry out a selection of credit and financial institutions that represent a high risk in several member states. The selected obliged entities will be supervised by joint supervisory teams led by AMLA that will among other things carry out assessments and inspections. The agreement entrusts the authority to supervise up to 40 groups and entities in the first selection process.
- For non-selected obliged entities, AML/CFT supervision would remain primarily at national level.
- For the non-financial sector, AMLA will have a supporting role, carrying out reviews and investigating possible breaches in the application of the AML/CFT framework. AMLA will have the power to issue non-binding recommendations. National supervisors will be able to voluntarily set up a college for a non-financial entity operating across borders if deemed needed.
- The provisional agreement expands the scope and content of AMLA’s supervisory database by asking the Authority to establish and keep up-to-date a central database of information relevant for the AML/CFT supervisory system.
Other powers
AMLA will monitor that selected obliged entities have internal policies and procedures in place to ensure the implementation of targeted financial sanctions, asset freezes and confiscations. AMLA will have a general board composed of representatives of supervisors an Financial Intelligence Units from all member states, and an executive board, that would be the governing body of the AMLA, composed of the chair of the Authority and five independent full-time members. The Council and the EP removed the Commission’s veto right on some of the powers of the executive board, notably its budgetary powers.
The provisional agreement introduces a reinforced whistle-blowing mechanism. Regarding obliged entities, AMLA will only deal with reports coming from the financial sector. It will also be able to attend reports from employees of national authorities. AMLA will be given the power to settle disagreements with a binding effect in the context of financial sector colleges and, in any other case, upon the request of a financial supervisor.
AMLA seat
This agreement leaves out a decision on the location of the agency’s seat, a matter that continues to be discussed on a separate track. The Council and EP are currently negotiating the principles of the selection process of the new Authority’s seat location. Once the selection process has been agreed, the selection process for the seat will be concluded and the location will be introduced in the regulation.
The importance for Cyprus
AMLA is crucial for Cyprus due to these key reasons:
- Compliance and Reputation: AMLA will help Cyprus to comply with EU anti-money laundering (AML) regulations, safeguarding its reputation as a trusted financial center.
- Enhanced Oversight: AMLA's supervision over high-risk entities improves monitoring, ensuring adherence to strict AML/countering the financing of terrorism (CFT) measures.
- Collaboration: AMLA facilitates cooperation among EU financial authorities, aiding Cyprus in combating cross-border financial crimes effectively.
- Economic Impact: A strong AML/CFT framework supported by AMLA can boost Cyprus's economic stability and attractiveness to investors.
- Policy Guidance: AMLA's recommendations and monitoring support Cyprus's national bodies in implementing robust AML/CFT policies.
- Potential Seat Location: Cyprus's possible selection as AMLA's seat could bring administrative and reputational advantages to the country.
In summary, AMLA's establishment strengthens Cyprus's regulatory framework, financial oversight, collaboration with EU members, and overall standing as a responsible financial jurisdiction in the European Union.
Next steps
The text of the provisional agreement will now be finalised and presented to member states’ representatives and the EP for approval. If approved, the Council and the EP will have to formally adopt the texts. Negotiations between the Council and EP on the regulation on anti-money-laundering requirements for the private sector and the directive on anti-money laundering mechanisms are still ongoing.
For more information please visit our website microsite on AML Compliance, Sanctions and Investigations or contact Ms. Dorita Michaelidou at This email address is being protected from spambots. You need JavaScript enabled to view it.
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