A single EU regulation against money laundering – Charles Cronin


After several directives, several high-profile money laundering scandals and numerous policy documents, the evidence is clear: money laundering remains an undiminished threat within the EU.

The European Commission sums up the consequences as follows: criminals and terrorists have lasting means to endanger public safety, the incidence of money laundering damages the reputation of jurisdictions, leading to the withdrawal of financial services, which in turn has negative effects on investment, and undermines the EU internal market.

In response, the Commission has recently published a series of proposals which together will address the fundamental issues of the European anti-money laundering (AML) regime. This is a new EU anti-money laundering authority, a first anti-money laundering regulation, a sixth anti-money laundering directive and new regulations to trace transfers of crypto-assets. This article reviews the proposal for a European Anti-Money Laundering Authority (AMLA), which is expected to enter into force on January 1, 2023.

These new measures will benefit Malta and EU businesses in general, as they will simplify cross-border financial services and, through the harmonization of standards, eliminate businesses that aggressively seek out AML-type risks without adequate controls. While Malta’s ‘gray list’ has put it in the spotlight for ineffective enforcement, the need for new EU proposals illustrates that Malta is by no means the only jurisdiction that is challenged by this issue.

The new LBA has a number of ambitious tasks and has extensive powers. The pan-European financial institutions most exposed to the risks will be placed under its direct supervision. The new authority will indirectly oversee all other financial institutions by setting expectations, carrying out assessments, reviewing work programs and pushing for supervisory convergence in all member states.

As part of this task, there is the conduct of periodic reviews of Member States’ supervisors “to ensure that all financial controllers have the resources and powers necessary to perform their duties”. It will enable colleges of supervisors to contribute to the convergence of prudential practices and the promotion of high prudential standards. This includes the coordination of thematic reviews across the EU. Its scope includes non-financial supervisory authorities and self-regulatory bodies.

New European Commission measures will benefit Malta and EU businesses in general-Charles Cronin

Over time, the authority’s presence will become more and more influential in the oversight of AML by MFSA and FIAU in terms of process, resources and efficiency. Ultimately, each oversight body will be measured, scored, and compared through a process that is likely to leave less room for subjective intervention.

Perhaps the most revealing power is the provision in Article 30, which, with the approval of the Commission, allows the authority to exercise direct prudential supervision over potentially dishonest financial institutions if their national supervisor appears unable or unwilling to implement corrective actions.

Within the framework of AMLA’s supervisory mandate is the power to impose substantial administrative sanctions on companies placed under its direct supervision. The regulation establishes a stereotypical approach to the imposition of sanctions. The offense is ranked first by its severity, then by the number of jurisdictions in which the offense occurred, then multiplied by defined aggravation and mitigation coefficients. Thus, a minimum penalty of 1 million euros could reach 10% of the group’s income if the financial institution had demonstrated several aspects of aggravating behavior.

With regard to FIUs and their duty to receive and investigate suspicious transactions, AMLA’s primary role is to coordinate and support the exchange of intelligence on suspicious activity across the EU. This includes a formal process for inviting FIUs to conduct a joint analysis; a review of methods and procedures; mutual assistance in the form of training, exchanges, secondments and sharing of good practices; and hosting of the information exchange platform – FIU.net.

The net effect of the authority’s influence on EU supervisors and FIUs will be to improve standards, practices and resources. No jurisdiction would envy public disclosure of a modest position in the ranking of authority for prudential convergence or pan-European cooperation.

Perhaps one of the new authority’s most influential powers will be its obligation to draft “Regulatory Technical Standards” (RTS) and “Implementing Technical Standards” (ITS) for approval by the European Commission. The new anti-money laundering regulation begins the process of creating a single European regulation on the fight against money laundering.

The development and details of the rulebook will be fleshed out by RTS and ITS. The Commission’s package and the use of ‘regulations’ which are directly enshrined in law without ‘transposition’ by the Member States demonstrate a strong collective political agreement that money laundering is a persistent and dangerous European problem that requires attention. firm European solution.

Charles Cronin is Head of Customer Relations and Business Development, Diligex.

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